Indian rupee can become global reserve currency.

The Indian Rupee (INR) has fallen sharply against the US Dollar (USD) in the last one month. This has resulted in the purchasing power of the INR in the international market diminishing and has increased import costs significantly. India, which is heavily dependent on oil imports, suffers severely due to the devaluation of the INR.

 Currently, India is the fastest growing major developing economy in the world. Very soon it is expected to be the third largest economy. Global sentiments are bullish on the Indian economy. JP Morgan and Bloomberg have recently added India to their Global Emerging Market Bond Index. Against this robust backdrop, it is a promising case to aim for making INR an alternative reserve currency. The incremental steps taken by the Government of India (GoI) and the Reserve Bank of India (RBI) to promote global acceptance of INR are in the right direction and commendable.

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The internationalisation of the INR will not only save transaction costs on foreign trades but also directly yield dividends for the Indian financial market. Capital flows in the debt market and equity market will surge as INR becomes a stronger currency. Liquidity and investor faith in the market will improve.

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Many countries have periodically considered the use of their national currencies through a range of accords, such as currency swap agreements and bilateral trade settlement agreements. China’s renminbi share in the global reserve currency rose when the Chinese leadership institutionalised multinational financial infrastructure to settle transactions in renminbi. China initiated a Cross-Border Interbank Payment System (CIPS) in 2015, similar to the US Clearing House Interbank Payments System (CHIPS).

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India, with its burgeoning economic power, will be a pivotal actor in determining the future of the global monetary system. China and Russia inking a bilateral agreement in 2019 to promote their respective currencies is reflective of like-minded countries coming together to determine economic linkages. On the other hand, multilateral organisations such as BRICS are also questioning their reliance on the dollar. For instance, one of the key issues being discussed at the 15th BRICS Summit at Johannesburg is the need to trade in domestic currencies and exploring a common currency for BRICS nations.

 The India VIX, a key volatility indicator, surged by approximately 16%—its most significant weekly gain this calendar year. Foreign Portfolio Investors (FPIs) continued to offload equities. The Nifty remains below its critical 50-day moving average (DMA) indicating weaker market sentiment across various sectors, with Nifty IT dropping by 4.7% last week.

Immediate support is anticipated at around 21,800, while resistance is expected at 22,400. Until the Index surpasses the 22,400 mark, a "sell on rise" strategy is recommended for next week.

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