From 95 to 92: Rupee Makes Swift Recovery on Oil Crash, Ceasefire Cheer; Market in Full Rally Mode

Indian rupee made a good recovery in early trade on Wednesday, strengthening by 50 paise to 92.56 against the US dollar, riding on improved global sentiment after the US and Iran agreed to a two-week ceasefire. The domestic currency has now surged significantly from recent lows near 95 levels, and it is one of its quickest short-term rebounds in recent months.

The rally in the rupee today can be seen after a volatile session on Tuesday, when the rupee had slipped 10 paise to close at 93.00 against the greenback. The market had remained cautious ahead of the Monetary Policy Committee (MPC) meeting of the Reserve Bank of India, which began its three-day deliberations earlier this week. Today, Governor Sanjay Malhotra will announce MPC decision.

According to data from Trading Economics, "the rupee strengthened to around 92.6 per dollar, extending gains for a second straight session and hitting a one-month high. The appreciation was largely driven by a sharp correction in crude oil prices and a broader rally in Asian currencies following easing geopolitical tensions."

"The ceasefire agreement, brokered by Donald Trump just hours before a self-imposed deadline tied to the reopening of the Strait of Hormuz, played a pivotal role in calming global markets. The de-escalation helped reduce uncertainty around energy supplies and shipping routes, leading to a normalization of trade flows and a drop in oil prices, a key positive for India, which is heavily dependent on crude imports. Lower US Treasury yields and a softer dollar further supported the rupee's upward swing."

Stock market surge alongside rupee recovery

Indian equities rejoiced in the positive sentiment, with benchmark indices saw a sharp rally on Wednesday. The BSE Sensex surged over 2,600 points to trade above 77,000 levels, while the Nifty 50 crossed the 23,800 mark, gaining more than 3% in early trade.

This one of the strongest single-day rallies in recent sessions, with all sectoral indices trading in the green and broader markets midcaps and smallcaps also posting gains of over 3%.

The main reason behind this is the easing of geopolitical tensions, a steep fall in crude oil prices which fell below $100/bl and a strengthening rupee, all of which boosted foreign investor sentiment.

Outlook: Policy cues and global factors in focus

The focus has now shifted to the outcome of the RBI's policy decision where the Monetary Policy Committee (MPC), led by Sanjay Malhotra, on Wednesday kept the repo rate unchanged at 5.25% while retaining its policy stance as "neutral,"

Speaking after the policy decision, the RBI Governor cautioned that disruptions in global energy markets could pose risks to India's fiscal deficit, due to the vulnerability of the economy to volatile crude oil prices.

Malhotra said that "Upside risks to inflation have increased, though the t the underlying fundamentals of the Indian economy remain strong. On growth, the central bank estimated India's real GDP expansion at 7.6% for the previous financial year."

On the trade front, sentiment has also been lifted by expectations of a potential Free Trade Agreement between India and New Zealand, likely to be signed on April 24. The deal is expected to grant tariff-free access to Indian goods in the New Zealand market and could attract investments of up to USD 20 billion over the next 15 years, further strengthening long-term rupee strength.