Indian Rupee and Stocks Rally as US Midterms Shift Capital

The Indian rupee is recovering and the NSE Nifty 50 Index has reached a two-month high, jumping 1.6% to cap a four-day winning streak. This rally is driven by a combination of domestic policy optimism and shifting global capital flows following U.S. midterm elections.

Foreign investors poured over $700 million into Indian equities on Tuesday, bringing total purchases over three sessions to approximately $1.5 billion. This surge coincides with a 0.3% slip in the dollar index, as results indicate the Democratic Party is likely to secure control of both the House and the Senate. Analysts at ING Bank suggest that investor concerns over tighter regulation of AI stocks under Democratic control are prompting a rotation of capital toward Indian equities as a hedge.

Domestically, sentiment is bolstered by Finance Minister Nirmala Sitharaman, who promised to examine concerns regarding taxes on stock-market gains. Investors anticipate that India may reduce or eliminate the long-term capital gains tax for foreign investors. Additionally, market participants expect a Democratic victory in the U.S. to result in a less aggressive U.S. trade policy.

Corporate performance is also supporting the market, with the National Stock Exchange of India reporting a 23% increase in quarterly profit. Investors continue to monitor quarterly results from firms including Apollo Hospitals, Biocon, Dabur, and Nykaa.