Indian Rupee: Foreign inflows to aid INR against US Dollar – ING

ING economists Deepali Bhargava and Lynn Song note that the Indian Rupee (INR) has given back much of its June gains as US–Iran tensions and rising Oil prices hurt sentiment. However, they remain constructive on INR, citing FCNR deposit measures and expected inflows above USD 50 billion by September. Potential global bond index inclusion and rotation from AI-driven equities are seen reviving foreign flows into India.

FCNR deposits and index inclusion aid INR

"The Indian rupee has unwound a significant portion of its June gains as renewed tensions between the US and Iran, coupled with steadily rising oil prices, weighed on sentiment."

"We remain constructive on the INR, supported by recent measures to attract FCNR deposits."

"We expect inflows to exceed USD 50bn by the time the scheme closes in September, helping to turn the anticipated balance-of-payments deficit into a surplus."

"In addition, potential inclusion in major global bond indices, alongside a rotation away from AI-driven equity markets, could revive foreign inflows into India, which has seen relatively muted investor interest despite robust nominal GDP growth."

"Together, these factors should support capital inflows and provide an additional tailwind for the INR."