New Delhi — The Indian rupee could appreciate against the U.S. dollar during the first half of fiscal 2027 as easing Middle East tensions and recent policy measures reduce near-term pressure on the currency, according to an Elara Securities report.
The report projected that the rupee could trade in a range of 93 to 95 against the dollar as current-account pressures ease and capital flows improve.
However, potential interest-rate increases by the U.S. Federal Reserve during the second half of the fiscal year could renew pressure on emerging-market currencies and limit the rupee’s gains.
Elara credited foreign-exchange market stabilization measures, tax relief for government bond investments and incentives designed to attract foreign debt inflows with easing near-term currency stress.
The report said a June 5 income-tax ordinance making investments in Indian government securities tax-free for foreign portfolio investors had helped revive inflows into the domestic debt market and moderate bond yields.
Foreign portfolio investment in Indian debt through the Fully Accessible Route reached $1.7 billion during the 10 trading sessions following the Reserve Bank of India’s policy announcement. That compared with $229 million during the previous 10 trading sessions, according to the report.
The possible inclusion of Indian bonds in the Bloomberg Global Aggregate Bond Index could help lift combined foreign inflows into the country to between $80 billion and $85 billion, the firm said.
Although risks surrounding the financing of India’s current-account deficit are expected to ease in fiscal 2027, the report raised concerns about the durability of foreign capital flows in fiscal 2028.
It cited a shrinking global pool of foreign direct investment, tighter U.S. monetary policy and weaker foreign investment in Indian equities as potential risks. Continued concentration of artificial intelligence-related investment flows in the United States could also weigh on foreign portfolio inflows into India, the report said.
Elara expects the Federal Reserve to raise interest rates by 25 basis points each in September and December 2026 and again in January 2027. (Source: IANS)
