Rupee may rise up to 82.50 against dollar on global bond index inflows: Experts

The index inclusion makes a pathway for foreign investors to have an exposure in the Indian bonds.

The rupee is likely to appreciate in the coming days and trade in the range of 82.50 to 83.50 against the US dollar, currency experts told Moneycontrol on June 28.

This is because inflows from foreign portfolio investors (FPI) in Indian bonds through global bond index will lead to appreciation of the Indian currency from the current levels, the experts said.

At 11:57am, the rupee traded at 83.45 against the dollar.

"Well, the range seems to be defined between 83 and 84 while the particular level could be near 83.50," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Kunal Sodhani, vice-president at Shinhan Bank, said the USDINR pair cannot be seen in isolation. "Overall, the broader range for the rupee should be 82.65-83.90."

Today, Indian bonds have officially become part of the JP Morgan's Government Bond Index-Emerging Markets (GBI-EM). This was followed an announcement by JP Morgan Chase & Co on September 22, 2023, that they will add Indian bonds in their global bond index.

This will lead to inflows of around $2 billion on a monthly basis in the Indian bond market. There is expectation of around $20-25 billion inflows throughout 10 months.

Experts also said that the rupee will outperform its peers in the coming days after the inclusion.

How full inclusion will happen?

The inclusion will happen in a phased manner over the period of 10 months.

JP Morgan has indicated that the index will eventually hold 10 percent weightage of Indian bonds, adding 1 percent every month starting June 2024 and reaching the maximum weight of 10 percent by March 31, 2025.

The index inclusion makes a pathway for foreign investors to have an exposure in the Indian bonds.

Will bonds have any impact?

Experts said that higher investments will also lead to a fall in bond yields and lower government market borrowing cost, going ahead.

On June 26, Moneycontrol reported that Indian bond yields, particularly for the 10-year benchmark bonds, are expected to trade in the range of 6.75 percent to 7.00 percent following the inclusion of Indian bonds in the JP Morgan global bond index.

The yield on the 10-year benchmark bond 7.10 percent 2034 traded at 7.0013 percent at 12:08pm on June 28.