Shifts in global investor appetite to continue to impact value of INR

The value of the Indian rupee is expected to continue being impacted by the shifts in global investor risk appetite given the huge foreign holdings of Indian equities. The appointment of Reserve Bank of India’s new governor, Urjit Pate, hints at monetary policy continuity, giving support to the Indian rupee in the midst of continuous global uncertainties, noted Scotiabank in a research report.

“USD/INR will likely close 2016 at 68”, added Scotiabank.

Meanwhile, the country’s sovereign credit rating profile indicates towards a possible upgrade, due to the ongoing enhancement in government finances. Moody’s has a “positive” outlook on India’s “Baa3” rating. Fitch and Standard & Poor’s rate India in the equivalent “BBB-” category, with a “stable” outlook, said Scotiabank.

Fitch has stated that creditworthiness of India is strengthened by comparatively solid external balances, strong medium-term growth outlook and progress on structural reforms. In the meantime, Fitch mentioned that India’s fiscal position continues to be subdued, while the business environment is challenging, yet rebounding. The International Monetary Fund anticipates that the country’s gross public debt would average 66 percent of GDP in 2016-2017.