INR: Underperforming outlook for 2026 – MUFG

The Indian Rupee is expected to underperform through 2026, according to the latest analysis from MUFG. The report, authored by Michael Wan, Senior Currency Analyst at MUFG, highlights the government's slower-than-expected pace of fiscal consolidation and larger borrowing requirements, which may impact bond markets and foreign inflows. The overall sentiment remains negative for the Rupee amidst these economic challenges.

Negative outlook for Indian Rupee

"India's government announced its FY2026/27 Budget on 1 Feb, Sunday. The biggest takeaway from an INR FX and rates perspective is the slower than expected pace of fiscal consolidation."

"As such, we think that RBI will likely have to inject more liquidity to cap bond yields or at least the pace of INR bond yield increases."

"Taken in totality, the changes stuck more to the tried and tested in our view, and as such is unlikely to change the trend of INR weakening for now."

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