Rupee seen 94/$ by fiscal end on lower crude, foreign inflows: Kotak Securities

New Delhi: The Indian rupee is currently trading near 95.40 per US dollar and it may appreciate towards 94 provided crude oil averages in low-to-mid $80/barrel, and foreign inflows and central bank reserves are steady, according to Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.

As a rule of thumb, every $10 move in Brent adds roughly $13-15 billion to India’s annual import bill, or about 0.3-0.4 per cent of GDP on the current account. So Brent holding below $100 keeps the external account well within manageable limits. When crude oil prices spiked to $120-126 per barrel earlier this year, effective energy diplomacy – diversified sourcing and longstanding supplier relationships contained inflation and protected households.

“The factors we would monitor are a durable move in Brent above $110 on renewed escalation in West Asia, further tightening in US rates, variability in portfolio flows, and the seasonal transition once the special deposit window closes in September. Each looks manageable given India’s buffers; sustained sub-USD 100 crude keeps the currency well anchored,” Banerjee said.

According to Kotak Securities, the base case for USD/INR is a gradual appreciation of the rupee towards 94 by fiscal year-end – consistent with Brent averaging in the mid-USD 80 or lower, as OPEC+ restores supply, the special deposit pipeline continuing to deliver, and foreign portfolio flows staying constructive.

However, renewed escalation in West Asia could lift crude prices and tighten US rates further, in that event, “we would expect the rupee to hold a 96-97 range, staying within territory already traded this year,” Banerjee said. The USD/INR pair is currently hovering around 95.40 against the US dollar.