Rupee Could Strengthen Against Dollar in First Half of FY27, Report Says
New Delhi — The Indian rupee could appreciate against the U.S. dollar during the first half of fiscal 2027 as Middle East tensions ease and recent policy measures reduce near-term pressure on the currency, according to a report released Monday.
Elara Securities said lower current-account pressures and improving capital flows could keep the rupee trading within a range of 93 to 95 against the dollar.
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, including the rupee, and limit its appreciation.
The report said policy intervention had helped contain near-term stress through foreign exchange market stabilization measures, tax relief for government bonds and incentives aimed at attracting foreign debt investment.
The Income-Tax Ordinance issued June 5, 2026, which made investments in Indian government securities tax-free for foreign portfolio investors, has helped revive inflows into the domestic debt market and contributed to moderating yields, the report said.
Foreign portfolio investment in Indian debt through the Fully Accessible Route increased to $1.7 billion during the 10 trading days following the Reserve Bank of India’s policy announcement, compared with $229 million during the preceding 10 trading sessions.
The report said India could attract combined inflows of $80 billion to $85 billion if the country’s bonds are included in the Bloomberg Global Aggregate Bond Index.
Although risks related to financing India’s current-account deficit in fiscal 2027 have eased, Elara Securities raised concerns about the durability of foreign capital inflows in fiscal 2028.
The report cited a shrinking global pool of foreign direct investment, tighter U.S. monetary policy and potentially weak foreign portfolio investment in Indian equities as capital remains concentrated in U.S. technology and artificial intelligence stocks.
Elara Securities forecast three interest rate increases of 25 basis points each by the Federal Reserve in September 2026, December 2026 and January 2027. (Source: IANS)
