India's currency closely correlated to stock market

The Reserve Bank of India (RBI) has been working overtime recently to hold down the value of the Rupee. The RBI has been buying dollars for over two weeks in order to make sure exports remain competitive. Nonetheless, the Rupee may still be overvalued by as much as 3%, reckon some analysts. This is largely due to foreign capital inflows, as foreigners have poured money into Indian equities at an astounding rate. Investors are anxiously awaiting the presentation of India's federal budget, on Febrary 28. If the budget conforms to investor expectatations, India's stock market should continue to hit new highs. Reuter's reports:

India's coalition government will present its second budget a week from Monday, in what analysts expect to be an expansionary package, focused on farms, healthcare, education and sanitation along with major tax reforms.

Read More: India Markets-Rupee near 6-wk low, shares flat pre-budget.