MUFG’s Lloyd Chan notes that the Indian Rupee has been a key beneficiary of lower Oil prices and renewed foreign equity inflows, with USD/INR dropping to its lowest level since April. Improved terms of trade and reduced pressure on the import bill and margins are supportive, while India’s equity market is attracting sizeable foreign capital compared with other Asian markets.

Rupee gains on Oil and flows

“INR has emerged as a key beneficiary of the recent combination of lower oil prices and returning foreign equity inflows, with USD/INR falling below 94.00 to its lowest since April.”

“Lower crude improves India’s terms of trade and eases pressure on the import bill and corporate margins.”

“Meanwhile, foreign investors bought a net $5.2bn of Indian equities last week, with inflows accelerating towards the end of the week. This contrast with net foreign equity selling in South Korea and Taiwan.”