Market Drivers And Oil Impact
Concerns remain that damage to Gulf energy facilities could lift oil prices again. Foreign Institutional Investors were net sellers on all trading days in March, selling Rs. 1,05,204.68 crore. Iran denied involvement in direct ceasefire talks with the US, while the US Dollar stayed supported. Nifty 50 rose almost 1.7% above 23,300, S&P 500 futures gained 0.7% to near 6,603, and DXY was 0.13% higher near 99.32. CME FedWatch put the odds at 91.4% that the Fed holds rates at 3.50%–3.75% or raises them in December. Technically, the 20-day EMA is near 92.85 and RSI is 72.19, with resistance at 94.75 then 95.00 and support at 93.65, 93.00, and 92.40. Looking back to this time in 2025, we saw the Rupee under severe pressure, with USD/INR hitting all-time highs near 94.75. This was driven by a Middle East war, oil prices touching $100, and massive foreign investors selling over ₹1 trillion of Indian assets in a single month. The market sentiment was clearly tilted towards further Rupee weakness.How Conditions Changed Since 2025
The situation today is quite different, as those ceasefire hopes from last year have largely held, easing geopolitical risk premiums. Brent crude has stabilized and is now trading closer to $84 per barrel, a significant drop from the highs we saw in 2025. This sustained moderation in oil prices removes a major headwind for the Rupee. Furthermore, the aggressive selling by Foreign Institutional Investors has reversed dramatically. We have seen net inflows of over $7 billion into Indian equities in the first quarter of 2026, signaling renewed confidence in India’s growth story. This shift provides strong underlying support for the currency, contrasting sharply with the outflows that concerned us last year. The Reserve Bank of India’s position also appears much stronger now. With foreign exchange reserves recently hitting a record high above $645 billion, the central bank has significant power to intervene and prevent excessive volatility. This creates a strong ceiling for USD/INR, making a sustained move above the 95.00 level less probable. On the other side of the pair, the US Dollar’s strength has waned. While in 2025 the market was betting on the Federal Reserve holding rates high, the conversation has now shifted to the timing of potential rate cuts later this year. The US Dollar Index (DXY) reflects this, having fallen from peaks near 99.30 to the mid-97s. Given these factors, the strong bullish momentum for USD/INR we saw in 2025 has faded. Traders should consider that the pair is more likely to be range-bound rather than trend higher. Selling out-of-the-money call options, for instance with strikes at 95.00 or 95.50, could be a viable strategy to earn premium from the decreased likelihood of a significant breakout. Create your live VT Markets account and start trading now.
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