Rupee slips on negative market sentiment, fall in fund inflows

The Indian rupee experienced a decline of 19 paise, reaching 85.29 against the US dollar in early trade on Tuesday. The drop follows a day of limited foreign institutional investor (FII) activity, where equities worth ₹135.98 crore were purchased. Forex traders noted that although falling crude oil prices offered some support to the local currency, investors remained cautious. 

The apprehension is largely attributed to the impending release of industrial and manufacturing production data for April and the first-quarter GDP growth numbers scheduled for later this week. The rupee's performance comes after a 35 paise increase on Monday, supported by an upward trend from the previous session.

In the currency market, the dollar index, which measures the greenback against six major currencies, was slightly weaker, trading down by 0.03% at 98.83. Meanwhile, Brent crude oil, the global benchmark, saw a decrease of 0.26%, trading at $64.56 per barrel in futures trade. This reduction in oil prices did not translate into a stronger rupee, as dwindling foreign fund inflows and subdued domestic equity market sentiment took precedence. The day's trading saw the rupee initially open at 85.15 before further depreciating against the greenback.

The domestic equity market mirrored the rupee's challenges, with the BSE Sensex tumbling by 465.46 points, or 0.57%, to conclude at 81,710.99. The Nifty index also registered a decline, dropping by 149.90 points or 0.60%, to 24,851.25. Analysts suggest that the market's tepid performance reflects investors' hesitation as they await significant economic data releases that could influence future currency and market movements. Despite the day's downturn, the market remains attentive to both global oil price trends and domestic economic indicators, which will likely shape the near-term outlook for the rupee and equity indices.