The rupee opened on a flat note and rose marginally by 1 paisa to 73.01 despite a weak dollar on Tuesday. Traders remained cautious ahead of Reserve Bank of India (RBI) monetary policy outcome to be announced on Friday, after the Union Budget announcement.
The domestic unit opened at 73.02 per dollar at the interbank forex market and inched 1 paisa higher to 73.01 over its previous close.
On Monday, the rupee depreciated by 6 paise to end at 73.02 per dollar on Monday due to fiscal concerns after the government projected a higher fiscal deficit of 6.8 per cent of the GDP for 2020-21 and increased borrowing target in the budget.
Fiscal deficit is an indication of the government's borrowing to meet the shortfall between expenditure and receipts from taxes and other sources.
The fiscal deficit in 2020-21 is estimated to soar up to 9.5% due to rise in expenditure on account of the outbreak of COVID-19 and moderation in revenue during this fiscal year.
Reliance Securities said in a research note said," The rupee is trading in a narrow range amid upbeat risk tone and worries over the impact of Monday's Union Budget. With the budget out of the way, markets will now look ahead to the RBI's monetary policy this week for further cues.
Meanwhile, the dollar index, fell 0.10 per cent to 90.89 against a basket of six currencies.
On the domestic equity market front, market indices continued trading at record levels on Tuesday, with Sensex back at 50K mark and Nifty breaching 14,700, in line with positive global equities. Extending gains for second session, Sensex gained by 1,200 points to trade at 49,870 and Nifty gained by 365 points to 14,650. Earlier today, Sensex and Nifty have hit intraday highs of 50,154 and 14,731. Sensex and Nifty have hit fresh lifetime highs of 50,184 and 14,753, on 21 January.
Foreign portfolio investors (FPIs) bought shares worth Rs 1,494.23 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 90.46 crore in the Indian equity market on 1 February, provisional data showed.
Brent crude futures, the global oil benchmark, rose 0.91 per cent to USD 56.86 per barrel. Oil price gained after oil producers moved in line with their committed output cuts shrugging off concerns regarding weak demand.
Kshitij Purohit, Product Manager, Currency & Commodities at CapitalVia Global Research said,"The U.S. dollar index is at 90.88 against currency basket. It closed above 50 Day SMA which placed at 90.52 showing bullish momentum. Asian equity market are trading higher on a Monday morning. Technically, USDINR pair closed positive, USDINR Feb Future is trading at 73.27. It is expected to trade with bullish momentum for the day. The USDINR Spot pair took support at 72.80 level and bounced back up to 73.15 levels and ended above 73.00 level indicating a positive momentum to continue with in the range of 72.70-73.20 levels."