Indian Rupee: Range consolidation with growth support against US Dollar – Commerzbank

Commerzbank’s Charlie Lay highlights India’s composite PMI at a four‑month high, reinforcing resilient growth and aligning with the RBI’s upgraded GDP forecast. Softer price pressures could allow the RBI to pause in December, though further tightening is possible. USD/INR has returned to the 94–97 range, with resilient growth supportive for INR but elevated Oil prices still a key headwind.

RBI stance and Oil shape Rupee

"India's HSBC preliminary composite PMI rose to a four-month high of 56.7 in October from 55.9 in September, driven by stronger services activity. The services PMI increased to 56.2 from 55.2, while the manufacturing PMI eased slightly but remained healthy at 54.9 from 55.1. The manufacturing output sub-index remained firm, while export orders expanded at their fastest pace in six months."

"The PMIs reinforce the picture of resilient economic growth, consistent with the RBI's upward revision to its FY2026–27 GDP growth forecast to 7.1% from 6.7% earlier this month. Importantly, price pressures eased, with input-cost inflation falling to its lowest in almost a year and selling-price increases were the weakest since March 2025, according to the PMI surveys."

"This could provide scope for RBI to pause in December following its 25bp hike to 5.5% earlier this month. RBI also shifted its policy stance to calibrated tightening amid concerns that inflationary pressures could broaden out. Further tightening remains a possibility, depending on the inflation outlook. The key determinants will be oil prices, food prices, and credit growth."

"USD/INR has returned to the lower end of the 94-97 trading range over the past six months, supported by RBI intervention and measures to curb USD demand."

"A more hawkish RBI and resilient growth are supportive for INR, although elevated oil prices remain a key headwind, increasing India's import bill and potentially widening the current account deficit. A sustained INR recovery will likely require lower oil prices and more stable portfolio flows. We expect USD/INR to consolidate within the 94-97 range in the near term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)