The rupee is forecast to appreciate against the dollar in 2024 as interest rate cuts from the US Federal Reserve and other central banks coupled with India’s inclusion in JP Morgan’s emerging market index are likely to see strong inflows into both equity and debt markets.
The rupee has declined nearly 0.54 per cent so far this year against a fall of 11.3 per cent in 2022, the biggest after 2013. Experts said the rupee rally would depend on the extent of intervention by the Reserve Bank of India — whether it aggressively mops up the inflows to boost forex reserves.
According to a note from Capital Economics, since the US Fed will cut rates next year than currently priced by the markets, the rupee can appreciate to 78 against the greenback by the end of 2024.
Suvodeep Rakshit, senior economist, at Kotak Institutional Equities, said the rates will be influenced by waning dollar strength against the major currencies, though extreme weakness is unlikely, oil prices, which are likely to average $85 per barrel, and FPI inflows given the Indian G-Secs’ inclusion in the global bond index.
“While robust capital flows will provide room for appreciation in the INR, we expect the RBI’s intervention to cap any gains. We expect the INR to trade in the range of 82.75-83.50 in the near term,’’ he said.
According to Ritesh Bhansali, director, Mecklai Financial, the rupee is likely to gradually appreciate in 2024.
“Emerging market (EM) currencies tend to do well when interest rates come down. All the EM currencies are expected to do well, but India will do better as we are expecting a $20-25 billion inflow into equity markets,” he said.
“Ahead of the inclusion in the JP Morgan index, many fund managers will be actively frontloading their investments in the Indian (debt) market. Here we can expect another $ 10-15 billion coming into debt markets. This could start happening from next month onwards,’’ Bhansali said.
