Synopsis
This week, Indian markets are on high alert for crucial economic data, as traders keenly watch foreign portfolio inflows that could dictate the rupee’s trajectory. Meanwhile, bond investors are sensitive to the balance between supply and demand. The rupee recently surged following the announcement of a trade deal between the United States.
ReutersIndian forex traders will be watching foreign portfolio entries this week to see if the rupee’s rally, triggered by the announcement of the US-India trade deal last Monday, could extend significantly.
In the fixed income sector, bond market investors will monitor supply and demand dynamics, which could prove key in determining the direction of bond yields.
The rupee closed at 90.6550 on Friday, up more than 1% for the week.
The United States and India unveiled an interim trade framework on Friday, building on an initial announcement made earlier last week. Even though this “breakthrough has lifted” sentiment towards Indian assets, analysts remain cautious about its impact on portfolio flows.
Foreign investors have bought nearly $900 million of Indian stocks so far in February, after withdrawing $4 billion last month, although they have sold $19 billion so far in 2025.
“While the currency (INR) may trade more stable for some time, especially if de-risking continues, upside in spot is likely to prove limited,” Goldman Sachs analysts said in a note.
In global markets, the focus this week will be on the release of key economic data in the United States as well as reactions to election results in Japan and Thailand.
OBLIGATIONS
The benchmark 10-year yield of 6.48% for 2035 settled at 6.7363% on Friday, marking its second consecutive weekly rise, after the Reserve Bank of India’s monetary policy decision.
The central bank kept rates at 5.25% as expected, but offered no new liquidity support. Traders expected changes to liquidity rules to ease the deposit squeeze amid rising yields and credit growth.
Traders expect the yield to move in a range of 6.71% to 6.80% this week, with sellers in control. Friday,
With the budget and central bank policy behind it, the market will focus on debt supply.
The MPC is set for an extended pause with the RBI focusing on liquidity through open market purchases and FX swaps, although higher borrowings for FY27 could add upward pressure on yields, said Puneet Pal, PGIM India MF.
India aims to borrow a record gross amount of 17.2 trillion rupees ($189.70 billion) for the next financial year, with net borrowing of 11.73 trillion rupees. India’s financial year begins in April and ends in March.
RBI Governor Sanjay Malhotra said “the emphasis on the scale of gross borrowings could be misleading and net borrowings provide a more accurate assessment of the fiscal situation.”
“It is not correct to look at gross borrowings because there will be many more repayments next year than the current year.”
KEY EVENTS: January Retail Price Inflation in India – Thursday, February 12 (4:00 p.m. IST) US Import Prices in December – Tuesday, February 10 (7:00 p.m. IST)
December Retail Sales – Tuesday, February 10 (7:00 p.m. IST) January Nonfarm Wages and Unemployment Rates – Wednesday, February 11 (7:00 p.m. IST) Weekly Initial Job Claims for the week preceding February 7 – Thursday, February 12 (7:00 p.m. IST) January Existing Home Sales – February 7 – Thursday, February 12 (8:30 p.m. IST)
Consumer price inflation in January – Friday February 13 (7:00 p.m. IST) (Reuters poll: 2.5%)
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