Indian Rupee Set to Draw Support From Foreign Inflows Amid Global Tech Correction

The Indian rupee is expected to draw support on Friday from a return of foreign capital to domestic markets following months of sustained outflows. The currency advanced 0.5 per cent during the week, touching a two-week high of 94.32 in Thursday's session before eventually settling at 94.4750. Market indicators point to a largely flat opening with a slight positive bias.

For much of the year, the Indian currency remained under pressure and relied heavily on central bank intervention for support. However, relief has arrived this week driven by two primary factors that had previously weighed on the rupee for months: oil prices and equity flows.

Crude oil prices have retreated amid expectations that recent political shifts in the United States, following Republican Party losses in the US midterm elections, could constrain political room to sustain the conflict with Iran.

Concurrently, foreign investors have turned to buying Indian equities. The broader market shift is being aided by a retreat from AI-linked technology stocks, which had previously captured capital at the expense of other markets. A technology rout intensified on Thursday following a Democratic Party victory in the US midterm elections, raising concerns about potential regulatory scrutiny and curbs on the expansion of AI data centres.

The impact of the global tech sell-off was stark across international markets. The Nasdaq Composite plunged 5.5 per cent, while the Philadelphia Semiconductor Index tumbled more than 12 per cent. Technology-heavy Asian markets also came under pressure on Friday, though losses in Indian equities were expected to remain relatively contained by comparison.

Provisional exchange data highlights a significant shift in capital allocation. Foreign investors purchased a net $1.6 billion of Indian equities on Thursday, marking their largest single-day purchase in nearly six years. This robust activity followed net purchases of approximately $2.2 billion recorded over the preceding four trading sessions.

According to market traders, whether this notable return of foreign capital translates into a more sustained reversal in investor sentiment toward India will remain a critical factor for the rupee's outlook, alongside ongoing developments in global oil prices.

"The massive single-day foreign inflow into Indian equities demonstrates how global macro shifts, such as the recent technology sector correction, can redirect capital toward emerging markets. While central bank intervention has historically supported the rupee, a sustained return of foreign institutional capital combined with easing oil prices provides a much healthier foundation for currency stability. For businesses and entrepreneurs operating in India, tracking these macroeconomic capital flows remains essential as global sentiment shifts." — Dr. Shishir Gupta, Founder & CEO, StartupLanes