Rupee may stabilize in H1FY27 on increased global stability: Report!

Due to reduction in global volatility and recent steps taken by the Reserve Bank of India (RBI), the pressure on the rupee may reduce in the coming time and it may see a recovery. This information was given in a report released on Monday.

The report released by Elara Securities said that the rupee may strengthen against the dollar in the first half of FY27. The reason for this is the reduction in pressure on current account deficit and increase in inflows, due to which the rupee may remain in the range of 93-95.

If the US Federal Reserve raises interest rates, as it is expected to by 50 basis points in H2FY27, this could put upward pressure on emerging market foreign currencies, including the rupee, and limit currency strength.

According to the report, the policy change helped handle the situation in the near term. Also, measures to stabilize the foreign exchange market, tax exemption on government bonds and incentives given to attract debt-based foreign exchange investment also contributed to this.

According to the report, the historic income-tax ordinance of June 5, 2026 – which made India’s government securities investments tax-free for FPIs – has led to investment inflows into the Indian debt market coming back to a healthy level and yields also declining.

FPI investment in India’s debt market through the FAR route has increased to $1.7 billion in the 10 trading days since the RBI policy, compared to $229 million in the 10 trading days before the policy. Including India’s potential inclusion in the global Bloomberg Bond Index, total investment in India could reach $80-85 billion.

Although risks to current account funding are diminishing for FY27, the report raises concerns about prolonged foreign capital inflows into FY28. This is due to low FDI at the global level, tightening of monetary policy in the US and focus of investment in the tech sector on the US. FPI equity investment in India is likely to remain low.

The report said that while America remains the center of AI investment, a period of rising interest rates is about to begin there, hence the outlook for FPI investment in Indian equities remains disappointing.

The firm has estimated that the US Federal Reserve may raise interest rates by 25 basis points three times in September 2026, December 2026 and January 2027.