We recently turned neutral on INR, and further raise our USD/INR forecast to 82.700 in 3m and 81.000 in 12m with our global team now calling for a shallower and delayed path for US dollar weakness.

There are some headwinds for INR in the nearterm, with inflation spiking more than we initially anticipated in July, albeit mainly driven by food prices so far. 

The RBI should remain hawkish for longer. We still expect the next move to be a rate cut but see this happening in June 2024 at the earliest. 

The structural reforms over the past decade put India in a good place to benefit from FDI flows, in part to tap the domestic market, but also in line with broader trends to diversify companies’ supply chains.