Rupee slips on oil jump, portfolio flows slow the fall

The Indian rupee weakened against the dollar on Thursday after crude oil prices extended gains on Middle East supply risks. The move was shallower than some traders expected, with steady foreign portfolio inflows into local equities offering support.

Brent crude jumped 3% earlier in the week, pushing India’s import bill higher. The dollar was also bid after the Reserve Bank of New Zealand delivered a hawkish rate decision, reinforcing the broader tone for the greenback. Dealers said the currency opened weaker and stayed under pressure through the morning.

“The oil move was the headline driver. Flows from foreign funds have been decent, and that kept the rupee from sliding too far,” a dealer at a Mumbai-based private bank said. Provisional exchange data showed foreign portfolio investors were net buyers of Indian equities in the session.

Traders also said the Reserve Bank of India was likely active through state-run banks, selling dollars to smooth the rupee’s decline. The central bank has a history of leaning against sharp rupee moves, especially when oil prices surge, to prevent imported inflation from accelerating.

A weaker rupee raises earnings for Indian IT services exporters that earn a large share of revenue in dollars. Infosys (INFY), with an Alpha Score of 57 out of 100 (Moderate label), and Wipro (WIT), scoring 46 (Mixed label), are stocks traders watch for rupee direction. HDFC Bank (HDB) in Financial Services, Alpha Score 49 (Mixed), faces a mixed impact: a falling rupee can lift treasury income but raises the cost of foreign-currency borrowings.

Oil markets remain on edge ahead of the weekly U.S. crude inventory report due later Thursday. A build in stockpiles could ease some of the upward pressure, traders said. A draw would keep the bid alive. The rupee’s next support level will depend on how far oil runs and whether portfolio inflows hold.

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