Anna 
In a note on Tuesday, Goldman Sachs projected that the Indian rupee is likely to appreciate to 81 against the U.S. dollar over the next 12 months, driven by expectations of significant foreign capital inflows. Despite this positive outlook, the currency is expected to underperform compared to its Asian counterparts, as the Reserve Bank of India (RBI) may continue to accumulate inflows and build forex reserves opportunistically.
Goldman Sachs economist Santanu Sengupta stated that robust equity portfolio flows into India are anticipated, especially as the Federal Reserve initiates an interest rate easing cycle in 2024. Additionally, strong debt inflows are expected following India’s inclusion in JPMorgan’s global bond indexes.
The brokerage holds a relatively bullish view on the rupee compared to other analysts, with expectations that it will gain to 82.80 by the end of November. This contrasts with a Reuters poll last month predicting a rupee value of 82.80 against the dollar.
Goldman Sachs envisions the rupee hovering around 82-83 per dollar over the next three to six months, emphasizing India’s favorable external balances. The country benefits from a combination of a low current account deficit, robust public market capital flows, ample forex reserves, and low external debt. As of December 22, India’s foreign exchange reserves reached a 21-month high of $620.44 billion.
To prevent excessive volatility in the rupee’s exchange rate, the RBI intervenes in currency markets. Goldman Sachs, in its note, also revised its estimates for India’s current account deficit, lowering it to 1% of gross domestic product in 2023 and 1.3% in 2024, down from the earlier estimates of 1.3% and 1.9%, respectively.
