Large capital inflows into the country have?seen the rupee appreciating by 10.79% against the dollar in FY2009-10.?The Indian currency had?depreciated 27%?aginst the greenback in FY 2008-09, thanks to?capital outflows in the wake of?the global financial crisis. The faster pace of economic recovery?in India has prompted global investors to look at India as a preferred investment destination in the aftermath of global financial?crisis.

?We have seen increased inflows of capital into India. With the pace of global economic recovery perhaps delayed, investors should put money into?India,? said Ananth Narayan, managing director & head of forex & rates, Standard Chartered Bank, who expects the rupee?to strengthen to as much as? 42 against the dollar by December, 2010. Other experts predict that the rupee could hit the?44-mark against the dollar in as short a time as three months.

On March 31 2009, the rupee ended the year at Rs 44.92/$1, touching a?new 18-month high against Rs 50.35/$1 recorded on April 2, 2009, the first trading day of the FY 2009-10.

The rupee had ended FY 2008-09 (on March 31, 2009) at Rs 50.73/$1 as compared to Rs 39.94/$1 recorded on April 1, 2008. In March 2010 alone, the rupee appreciated 2.53% against the dollar, which was second highest monthly appreciation in FY2009-10 after 5.99% gain?recorded in May, 2009.

For the fiscal year 2009-10, foreign institutional investors? net buying of equities was estimated at Rs 1,10,744.40 crore while in 2008-09 they were net sellers and had sold Rs 4,82,48.50 worth of equities. The 30-share Sensex?closed at 17527.77 on March 31, registering a gain of 105.98% over the?8509.56 level?recorded on October 27, 2008 on the BSE.

Additionally, overseas remittances also added some push to the rupee?s rise. Provisional balance of payments data released by the Reserve Bank of India on last Wednesday shows that overseas Indians remitted $55.06 billion as compared to $51.6 billion in 2008 and $37.2 billion in 2007.

?In 2008-09, we saw the worst financial crisis world over after 1930 where in there was a contraction of investment interest. Now, India is on the path of faster recovery and emerged as a key investor destination in emerging markets,? said K N Dey, director ? Basix Forex & Financials, who sees rupee level at Rs 43.50/$1 by December, 2010.

India registered an impressive GDP growth of 7.5% as per latest data. The Prime Minister sees a 9%-plus growth by the end of 11th 5-year plan (2007-12).

This also makes a strong case for increased overseas investments in India.

Some dealers believe the Reserve Bank may intervene to check the gain in the rupee in a bid to protect exporters. However, the central bank, on many occasions, has indicated?that it was not in favour any rupee level but? more concerned about rupee volatility.???

?The RBI is well of aware of the rupee?s reasonable level beyond which if rupee rises, it will intervene immediately to stem its rise. A little appreciation of the rupee also helps increase ?competitiveness among exporters,? concluded a currency head at a state-owned bank, on condition of anonymity.