USD/INR: Indian Rupee Gains Ground on Mar 28 on Likely Foreign Equity Inflows

The Indian Rupee (INR) edged higher on Friday, supported by likely foreign institutional investor (FII) inflows into local equities, as per news reports.

The USD/INR pair is trading lower at 85.43, marking a 0.26% decline as of March 28, 2025. However, several factors, including month-end dollar demand and rising crude oil prices, could limit the rupee’s upside in the near term.

Key Drivers of Rupee’s Strength

The rupee has benefited from strong FII participation in the domestic equity markets. On March 27, FIIs were net buyers, purchasing shares worth ₹11,111 crore, while domestic institutional investors (DIIs) net bought shares worth ₹2,517 crore. This marks the largest single-day FII inflow in 2025.

However, on a year-to-date basis, FIIs have been net sellers of ₹1.35 lakh crore, whereas DIIs have net bought ₹1.80 lakh crore worth of shares, reflecting overall domestic resilience amid global uncertainties.

Factors Limiting INR Gains

Despite the positive sentiment from foreign inflows, the rupee’s strength could be capped due to month-end demand for US dollars from importers, especially as companies settle international trade obligations.

Historically, this trend exerts downward pressure on the INR, preventing it from appreciating further.

Another potential headwind is the recent announcement by US President Donald Trump regarding a 25% tariff on automotive imports, set to take effect on April 2. This policy move could strengthen the US Dollar (USD) due to increased investor confidence in US assets, thereby weighing on emerging market currencies, including the INR, as per news reports.

Conclusion

The Indian Rupee’s recent gains highlight the influence of strong foreign inflows and domestic market resilience.

However, external challenges such as month-end USD demand, and global trade policies continue to play a crucial role in shaping the INR’s movement.

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