The rupee appreciated 21 paise to 81.97 against the US dollar in early trade on Thursday, as a rally in domestic equities and losses in the greenback against major rivals overseas strengthened investor sentiment.

Besides, encouraging macroeconomic data supported the local currency, forex traders said.

At the interbank foreign exchange, the domestic unit opened sharply up at 81.98 against the dollar and then strengthened slightly to 81.97, registering a gain of 21 paise over its previous close.

In the initial trade, the domestic unit was moving in a tight range of 81.95-81.99 against the American currency.

In the previous session on Wednesday, the rupee had settled at 82.18 against the dollar.

Meanwhile, retail inflation rose to a three-month high of 4.81 per cent in June, mainly on account of hardening prices of cereals and pulses, though it remained within the comfort zone of the Reserve Bank.

India's industrial production rose to 5.2 per cent in May from 4.5 per cent in April 2023, mainly due to good performance by the manufacturing and mining sectors, according to official data released on Wednesday.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.04 per cent to 100.14.

Brent crude futures, the global oil benchmark, rose 0.49 per cent to USD 80.50 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 337.05 points or 0.52 per cent higher at 65,730.95. The broader NSE Nifty advanced 96.65 points or 0.50 per cent to 19,480.95.

Foreign Institutional Investors (FIIs) emerged as net sellers in the capital markets on Wednesday as they sold shares worth Rs 1,242.44 crore, according to exchange data.

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