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RBI opens up debt markets to raise FX

RBI opens up debt markets to raise FX

We grow more confident of our call that RBI will raise FX reserves, at every opportunity, to buy insurance against global contagion. It opened fresh issuances of 5 year, 10 year, and 30 year G-secs to non-residents from FY21 (as announced in the Union Budget) under a Fully Accessible Route (FAR). This should be seen as a major step to enter Indian G-secs into global benchmark indices that we have favoured since 2013. Second, we have also cut our FY21 current account deficit by 70bps to 0% of GDP after our oil strategists have cut their oil forecast by $12/bbl to $35.5/bbl for FY21. Finally, we continue to expect RBI’s recent FX accretion to keep speculative attacks on rupee at bay. It will also likely try to augment FX flows by incentivising exporters to bring back proceeds, raise the cost of import finance and hike rupee NRI/FCNR deposit rates. Our FX strategists see Rs 76/USD in June.

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