The rupee showed signs of improvement, gaining 15 paise against the US dollar, offering relief to market sentiments. DBS Bank’s Executive Director and Senior Economist, Radhika Rao, highlighted the impact of global and domestic factors on the currency’s performance. The recent easing of tensions related to Greenland has contributed to a more positive market outlook.
A potential trade deal with the European Union and positive signals from US-trade negotiations have added optimism. Despite economic growth strength, the rupee faces downward pressure. While a weaker currency benefits exporters, it poses challenges in other sectors. Capital flows remain a concern, with outflows in equity markets and tepid interest in bonds.
The current account deficit is expected to remain manageable, but capital flows continue to be a focus. Net FDI shows improvement compared to the previous year, but repatriation pressures persist. The upcoming Budget is anticipated to reveal increased government borrowings in the fiscal year 2027.
