USD/INR: Stronger Rupee on Oil slide – Societe Generale

Societe Generale’s EM team, including Santosh Ejanthkar and Tanmay Purohit, note the Indian Rupee is at its strongest level in over six months, with USD/INR breaking below 94.00 as a sharp Brent decline improves India’s terms of trade and inflation outlook. Economist Kunal Kundu expects headline CPI to accelerate, keeping the RBI on track for a December rate hike.

India benefits from sector rotation and Oil

"In EM, the INR is trading at its strongest level in more than six months, with USD/INR breaking below 94.00 as the sharp 16% decline in Brent crude last week provided a significant boost to India's terms of trade and eased concerns around the inflation outlook to an extent."

"Our economist Kunal Kundu is pencilling in acceleration in headline CPI to 6.3% yoy in October from 5.54%, which should keep the RBI on track for a 25bp rate hike to 5.75% in December."

"From flows perspective, cracks are also beginning to emerge in the global AI trade, helping to reshape regional equity performance."

"Semiconductor-heavy markets such as South Korea and Taiwan have come under pressure recently as investors rotate out of crowded technology positions, a dynamic that may prove relatively supportive for India given its lower direct exposure to the AI and chip cycle."

"Combined with lower oil prices and improving foreign investor flows, the shift has supported not just Indian equities but also the INR and local bonds, reinforcing the view that India could emerge as a relative beneficiary if the leadership within Asian equities broadens beyond the AI winners."

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