Posting its biggest single-day gain in two months, the rupee on Monday surged by 49 paise to close at 69.74 against the US dollar following sharp gains in the equity market and foreign capital inflows after exit polls predicted another term for the ruling NDA government. Forex traders said investors welcomed exit poll results that predicted a comfortable majority for the BJP-led government. “Most exit polls are indicating a clear majority for the NDA. Domestic assets are set to rally unless exit polls have got it terribly wrong. Actual results should be more or less in line,” said an analyst with IFA Global. According to WGC Wealth chief investment officer Rajesh Cheruvu, India saw a remarkable strengthening in its currency after exit polls and some de-coupling of the INR from other emerging currencies could be seen over the next few trading sessions. On Friday, the rupee had settled at 70.23 against the US dollar. This is the biggest single-day for the rupee since March 18 when the currency had zoomed by 57 paise or 0.82 per cent. “Most of the exit polls have projected thumping majority for the NDA government. The government has taken bold steps in the last five years. This ensures policy continuity and required stability. Hence it will attract long term investors. So if the exit polls match the actual outcome then the rupee may head towards 68 levels in coming sessions,” said Rushabh Maru, research analyst — currency and commodity, Anand Rathi Shares and Stock Brokers. However, rising crude oil prices weighed on the domestic currency. “If the rupee is not a worry after May 23, we may see the Reserve Bank of India cutting rates another 25 basis points in its June policy as core inflation is softening and growth is weak. It may also likely announce some liquidity infusion measures, maybe open market operations (OMOs) or another forex swap depending on FPI inflows post actual results,” IFA Global said. Though the rupee may remain decoupled from its Asian and emerging market counterparts for a few sessions, it will continue to be at risk from weaker Yuan and higher crude prices once the euphoria settles. “We expect the central bank to smoothen volatility and prevent the market from positioning in either direction. It may be present at lower levels to absorb inflows today,” it said.
