The rise in value of rupee have come on the back of heavy foreign flows into both equities and debt. Overseas investors have bought $852.10 million (Rs. 5,200 crore at 1 dollar-61 rupees) in equities and $5.6 billion (Rs. 34,000 crore) in debt so far in this calendar year.
High deficit was the single biggest factor that pressured the rupee last year. In the third quarter of the current financial year, India's CAD narrowed sharply to $4.2 billion or 0.9 per cent of gross domestic product from $31.9 billion or 6.5 per cent of GDP in the third quarter of 2012-13.The sharp reduction in CAD was helped by a big drop in import of gold and silver, while higher exports also helped.
We can expect rupee in the 61-64 range and if we get a very strong general election outcome rupee will see some appreciation bias towards 59-60 levels.