INDIA RUPEE-Rupee nudges higher amid Mideast uncertainty; maturing NDFs, outflows cap gains

By Jaspreet Kalra

MUMBAI, Mar 24 (Reuters) - The Indian rupee nudged up on Tuesday, after hitting a record low in the previous session, as the U.S. and Iran provided conflicting messages on talks about a resolution to the war, while strong outflows and maturing non-deliverable forwards limited gains.

The rupee INR=IN was at 93.84 as of 11:10 a.m. IST, up 0.1% from its previous close. The currency had hit a record low of 93.98 on Monday, pummelled by worries over the deepening Iran war.

U.S. President Donald Trump said he was postponing a plan to hit Iran's energy grid, citing productive talks with senior Iranian figures. Tehran denied any negotiations were taking place, and launched waves of missiles into Israel.

"The developments are encouraging, but uncertainty is high and markets are reactive and volatile," analysts at ANZ said in a note. "An early cessation to fighting would be welcome, but even in that event it will take some time for global energy markets to normalise."

Beyond the geopolitics, the rupee grappled with familiar troubles on Tuesday as dollar demand remained elevated due to maturity of positions in the non-deliverable forwards market and on account of foreign portfolio outflows.

Overseas investors have sold nearly $12 billion of Indian stocks and bonds on a net basis over March so far.

Indian equities partially recovered, with the benchmark Nifty 50 .NSEI up 0.8%, tracking Asian shares, but bonds remained under pressure as traders returned to fretting over elevated debt supply. The yield on the 10-year benchmark bond drifted up to 6.84%.

HSBC's March data for India purchasing managers' index, a crucial economic indicator, pointed to the weakest expansion in Indian private sector output since October 2022.

"Companies indicated that the Middle East war, unstable market conditions and inflationary pressures all dampened growth," a note accompanying the data release said.