The Indian rupee recovered momentum to settle higher by around 28 paise at ₹95.31 per dollar on Tuesday, as reported by Business Standard. At the interbank foreign exchange market, the rupee opened at 95.47, touched an intraday high of 95.23 and a low of 95.67, registering a significant gain from its previous close. This represents a recovery from Monday's performance when the rupee had depreciated 43 paise to settle at 95.61 against the American currency. Forex traders said the rupee opened on a stronger note after Israel and Iran agreed to halt attacks against each other following a series of mutual attacks from Sunday night, which marked the most serious escalation since the ceasefire in April, with the currency benefiting from reduced geopolitical tensions in the West Asia region. IFA Global said in a research note that the rupee is likely to trade in a 95.40-95.80 range with a weakening bias. The latest gains come as Brent crude oil prices and the US dollar index retreated from their elevated levels after a pause in US-Iran hostilities, providing additional support to the rupee's strength.
The Reserve Bank of India has announced significant changes to its Foreign Accessible Route (FAR) framework for government securities, while the Indian government has exempted foreign investments in government securities from capital gains tax through an ordinance issued on June 5, 2026. According to reports from CNBC TV18, the central bank has expanded the eligible universe of government securities under the Fully Accessible Route to include 15-year, 30-year and 40-year tenor government securities (G-Secs). This represents a substantial shift from the previous framework, which was largely restricted to government bonds with maturities of up to 10 years. The Union Cabinet approved a proposal on Wednesday to eliminate capital gains tax on foreign portfolio investments in government bonds, removing the previous 12.5% long-term capital gains tax that foreign investors were required to pay on listed shares and bonds held for more than 12 months. The ordinance brings changes in the Income Tax Act to provide this exemption, with the government deciding to remove the capital gains tax on G-secs to attract long-term, patient capital because these instruments have a longer tenure.
Local equities also rebounded from two-month lows as a halt in hostilities between Israel and Iran boosted hopes that peace negotiations could move forward, as reported by Business Standard. The BSE Sensex settled 394.50 points (0.54%) higher at 73,918.76, while the NSE Nifty 50 advanced 119.10 points (0.52%) to close at 23,242.10, showing positive momentum following the geopolitical developments. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.80, down 0.24%, while Brent crude, the global oil benchmark, was trading lower by 2.04% at USD 92.33 per barrel in futures trade. On the domestic equity market front, Sensex rallied 394.50 points to settle at 73,918.76, while the Nifty climbed 119.10 points to 23,242.10, showing positive momentum following the geopolitical developments. The rupee's recovery reflects the broader market sentiment as investors respond to the easing of regional tensions and declining oil prices.
The expanded FAR framework will provide foreign investors greater access to India's long-dated sovereign debt market without investment limits. As reported by CNBC TV18, this move is designed to potentially broaden the investor base and improve demand for longer-tenor government bonds. The policy change represents a strategic effort by the RBI to attract foreign capital into India's government securities market by removing previous restrictions on longer-duration bonds. Under this proposal, some long-term sovereign bonds could be designated as FAR securities, allowing foreign investors to buy those bonds with no limits on their investment so that global funds can easily accumulate positions in the Indian debt market. Market experts believe the proposed reforms could help India attract a larger share of global fixed-income investments, with increased foreign participation in government bonds generating additional foreign exchange inflows and providing support to the rupee.
India recorded a current account surplus of USD 7.1 billion, or 0.7 per cent of GDP, in the January-March quarter of 2025-26, helped by services exports and higher remittances, according to Reserve Bank data released on Monday, as reported by The Hindu BusinessLine. The surplus was USD 13.7 billion or 1.4 per cent of GDP in the fourth quarter of 2024-25. However, for the entire fiscal 2025-26, the current account deficit stood at USD 25.2 billion or 0.6 per cent of GDP compared to USD 22.9 billion or 0.6 per cent of GDP in 2024-25. Foreign institutional investors offloaded equities worth ₹5,555.67 crore on a net basis on Monday, according to exchange data, showing continued foreign investor selling pressure despite the rupee's recent strength. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, expects the rupee to trade with a negative bias due to uncertainty in the West Asia war, but noted that if de-escalation remains, recovery may be seen.
