There is no reason for markets to fret over INR depreciation.

Confidence that the government will lower the budget deficit target for FY25 to 5.2-5.4% of GDP in February (from the FY24 target of 5.9%) is supportive of the currency and INRGBs.

The general election in April/May naturally poses tail risk, but favourable results for the BJP in state elections mean PM Modi can steer clear of a populist election agenda.

We are forecasting a 10-year yield of 6.20% and 81.00 for USD/INR at end-2024.