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Informist, Wednesday, Jul. 1, 2026

 

By Pratiksha

 

NEW DELHI – The rupee is expected to remain broadly steady against the dollar this month as the impact of likely foreign inflows following recent measures by the Reserve Bank of India and the government may be offset by the central bank's intervention through dollar purchases, market participants said. A globally strengthening US dollar may also weigh on the Indian unit, they added. 

 

The Indian currency is likely to settle at 94.75 a dollar by the end of this month, broadly steady from 94.66 at the end of June, according to the median of estimates from 16 banks and brokerages polled by Informist. 

 

"While the RBI's recent liquidity and FCNR (B)-related measures did provide near-term stability, the overall bias (for the rupee) remains towards gradual depreciation as the central bank is expected to absorb inflows rather than allow a sustained appreciation of the currency," said Amit Pabari, managing director at CR Forex. 

 

The Indian unit appreciated 0.4% against the dollar last month, helped by an interim peace deal between the US and Iran and the central bank's measures to attract foreign inflows. Among a host of foreign capital measures, on Jun. 5, RBI Governor Sanjay Malhotra announced a concessional foreign exchange swap facility till Sept. 30 to incentivise external commercial borrowings by public-sector undertakings. He also introduced a facility to cover the full hedging costs for banks raising fresh three- to five-year foreign currency non-resident (bank) deposits till Sept. 30. 

 

The government, meanwhile, exempted foreign investors from paying capital gains tax on investment in government bonds. It also exempted foreign investors from paying any withholding tax on interest on such investments.

 

Market participants expect the central bank's swap facility for FCNR(B) deposits to draw the majority of foreign inflows. According to a median of a separate Informist Poll, the RBI's swap facility for banks to raise fresh FCNR(B) deposits is expected to draw around $43 billion in inflows. 

 

While inflows on the back of the FCNR(B) and external commercial borrowing swap window have likely been minimal so far, market participants expect them to pick up by the second half of this month. They expect a majority of the inflows to come in September. By the end of September, the Indian unit may settle at 94.50 per dollar, according to the median of estimates from 12 respondents.

 

"I am anticipating inflows from ECB and FCNR to come in from the second week of July," Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services Ltd., said. "Flows should be decent from the second to the fourth week of July. A roundabout of $10 billion-$15 billion may flow in July."

 

Market participants also expect foreign portfolio inflows to start trickling into Indian markets now that the situation on the West Asia war front has stabilised with an interim peace deal between the US and Iran. After posting net foreign portfolio outflows for three consecutive months, India saw net FPI inflows worth $2.69 billion in June. However, on a gross basis, FPIs continued to pull out funds from domestic equities. 

 

Foreign inflows into debt may continue as market participants are hopeful about Indian bonds' inclusion in Bloomberg Index Services Ltd.'s flagship Global Aggregate Index, the update for which is due this month, following the government's and RBI's recent foreign capital measures. Depending on the weightage of India's government bonds in the marquee index, FPIs are expected to buy more than $20 billion in Indian gilts over the next year. 

 

Market participants expect lower global crude oil prices, on the back of the peace situation between the US and Iran, to continue providing a cushion for the local unit. Brent crude prices slumped over 20% last month to pre-war levels. IDFC FIRST Bank said that given the pace of decline in crude oil prices, the 2026-27 (Apr-Mar) Indian crude basket could average $75-$80 per barrel, against its previous estimate of $90 per barrel.

 

While things on the West Asia war front have improved significantly, given the volatility in the global situation, market participants will remain on edge and continue to keep a close eye on any fluctuations in crude oil prices. 

 

STUMBLING BLOCKS
While bets are piling up in favour of the Indian currency, market participants expect the central bank to intervene by purchasing dollars to make the most of any appreciation of the Indian unit and replenish its foreign exchange reserves. Most dealers expect the central bank to intervene by purchasing dollars above 94.00 a dollar. None of the 16 poll respondents expects the rupee to rise above 94.00 a dollar in July. 

 

The RBI has had to draw heavily on its foreign exchange reserves as the Indian unit came under immense pressure after the war in West Asia broke out, falling to a record low of 96.96 a dollar last month. The reserves fell to $672.59 billion as of Jun. 19, nearly $60 billion below the record high set just before the war started. 

 

The apex bank may also want to unwind its record high short dollar forward book, which is expected to increase further following recent policy measures aimed at shoring up dollar inflows – as banks swap dollars for rupees with the RBI at a concessional cost, they said. The RBI's net outstanding sales of dollar-rupee forward contracts rose to an all-time high of $106.65 billion at the end of May.   

 

Further, a strengthening US dollar, driven by growing expectations of a rate hike by the US Federal Reserve this year, is also expected to be a pain point for the local currency, according to market participants. The dollar index, which measures the strength of the dollar against a basket of six major currencies, surged over 2% last month to hit its highest level in over a year. 

 

POLL DETAILS

Participant	Jul-end	Sept-end
CR Forex	95.50-95.80	96.00-96.50
CSB Bank	94.75	93.50-94.00
DBS Bank	94.20-94.40	93.50-93.75
Finrex Treasury Advisors LLP	94.50	93.75
Globe Capital Market	94.00-96.25	-
HDFC Securities	94.10-96.30	93.50-96.50
ICICI Bank	94.00	93.00
IDFC FIRST Bank	95.00	94.00-94.50
Karur Vysya Bank	94.10-95.20	93.50-94.50
Kotak Mahindra Bank	94.50-95.00	-
LKP Securities	96.50	97.50
Mecklai Financial Services	94.00	94.50
Shinhan Bank India	94.40-95.80	-
South Indian Bank	93.25-93.50	-
Tamilnad Mercantile Bank	96.00	97.00
UCO Bank	94.50	94.50
Median	94.75	94.50

 

End

 

US$1 = INR 95.25

 

Edited by Akul Nishant Akhoury

 

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