<h1>Capital inflows strengthen the rupee following renewed FDI and portfolio investment and improved macroeconomic fundamentals recently.</h1> Rupee appreciation in February-March 2017 followed significant capital inflows-both portfolio and FDI-with net capital inflows more than covering the current account deficit and increasing foreign exchange reserves. Net foreign investment inflows were sizable in 2016-17 and FII flows recovered since February after an earlier negative phase; FDI inflows remained robust. The strengthening of the rupee is attributed to investor confidence arising from favourable growth prospects and stable macroeconomic fundamentals such as low inflation, a contained current account deficit and adequate forex reserves.