Further rupee steps expected in Indian debt/FX

Expectations that the government will announce a package of measures to bring in foreign inflows prop up the rupee, could determine trading in bonds and currency markets.

Among the steps being considered are raising dollars via state-run banks or companies or easing overseas borrowing rules.

Also Read: RBI's tightening measures can pull GDP to sub 5%: Experts

The central bank could also announce additional steps after its cash-draining measures announced last month. Measures from the central bank or government could lift the rupee, which hit a record low of 61.80 on Tuesday.

Global factors will also have their impact, traders say. The rupee is broadly seen holding in a 60.50 to 61.50 range next week.

Traders, however, expect the RBI to prevent the rupee from slipping below 61.50 levels by intervening in the market. Bond traders say any steps to boost the rupee that does not tighten the domestic cash situation further could spark a rally in debt. Benchmark 10-year bond yields have risen over 60 basis points since the RBI first announced its measures on July 15.

Dealers will also watch the factory output and retail and wholesale price inflation data.

Key factors/Events to watch

Monday: Industrial production data at 1730 India time (1200 GMT)

Consumer price inflation at 1730 India time

Manufacturing output data at 1730 India time

Wednesday: Wholesale price inflation data at noon (0630 GMT)

Thursday: National Holiday

Friday: Foreign exchange reserves data at 1700 India time