Strong portfolio capital flows into stock markets and direct investments will continue to push the rupee up against the dollar in 2010.

The rupee opened 2009 at 48.77 to a dollar. It continued to depreciate until the middle of March. Then, it began to strengthen till the close of the year.

Also Read   Related Stories News Now - Markets put up their best show ever - Expect moderate returns in 2010 - Arvind Singhal: A future-defining decade ahead - No fear of asset bubble on rising inflows: RBI - RBI tightens ECB guidelines - Seeking safety with reasonable returns

Also Read   Related Stories News Now - Markets post worst May performace since 2006 - Kavveri Telecom Q4 net declines over 6% - Wall Street opens flat on economy worries - RIM to set up first BlackBerry innovation zone in India - Rajaratnam bragged about sources of inside info: Gupta lawyers More

HSBC India co-head, global markets, Hitendra Dave, said the rupee would show a small and gradual appreciation. It may witness up to 5 per cent appreciation during the course of the year. At present, it trades at 46.70 against the dollar.

Capital flows – direct as well as foreign institutional investments – will be much bigger. While global movement of the dollar will have an impact on immediate trading, overall capital flows will influence the long-term value.

Rohini Malkani, chief economist with Citigroup, said a combination of external factors such as global liquidity, a weak dollar and a higher risk appetite, coupled with higher growth and interest rates set the environment for continuation of dollar inflows.

The US financial group estimates that the rupee may see some appreciation and rule around Rs 44 to a dollar by March.

While capital flows would give a strong push to see the rupee gain against international currencies, rising inflation could exert some adverse impact.

BA Prabhakar, executive director with Bank of India, concedes that rising prices (inflation) have the potential of knocking out value from the Indian currency. But flow of overseas portfolio money – direct investments and capital market investments – is expected to contain any downside effect of inflation. In his view, the rupee could appreciate slightly to test 46 to a dollar in early months.

Rupa Rege Nitsure, chief economist with Bank of Baroda, said the rupee is game play of pace at which portfolio investments come in and global crude oil prices. Rupee may depreciate slightly by March 2010, perhaps on effect of inflation. Indian currency could trade between 47.0 to 47.50 to a dollar by March 2010.

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - Markets post worst May performace since 2006 - Kavveri Telecom Q4 net declines over 6% - Wall Street opens flat on economy worries - RIM to set up first BlackBerry innovation zone in India - Rajaratnam bragged about sources of inside info: Gupta lawyers

Tags : capital flows | stock markets | United Progressive Alliance | dollar | HSBC India   Read Business news in  Advertisements -  India's no. 1 Property Site. Click here to know more -  Benefits Upto Rs. 2.36 Lakhs on the Fully Loaded TJet Petrol. -  Help a Child Achieve her. Click to know more -  Benefits Upto Rs. 2.36 Lakhs on the Fully Loaded TJet Petrol. -  Watch The Film Here. Click here to know more.. -  Learn How One City is Running on FOOD SCRAPS. -  1 billion in saving for Unilever without any tangles. -  One Partnership Endless Possibilities. Click here to know more -  Helping doctors detect diseases earlier, saving costs & extending lives. -  Which is the best plan for your daughter -  Check out the TRUE COLOURS of your Stocks, Now for FREE! -  One of the leading business schools in the world.Know More -  2 Lac Apartments, 1 Lac House / Plots. Click here