Indian Rupee: Growth Support Underpins Range Consolidation Against US Dollar – Commerzbank

India’s composite PMI reached a four-month high. Commerzbank’s Charlie Lay notes that the reading underscores resilient growth and is consistent with the RBI’s higher GDP forecast. Easing price pressures may give the RBI room to pause in December, although additional tightening remains possible. With USD/INR back in the 94–97 range, robust growth supports INR, while high oil prices remain a major headwind.

Rupee Outlook: RBI Policy and Oil Prices

"India's HSBC preliminary composite PMI rose to a four-month high of 56.7 in October from 55.9 in September, driven by stronger services activity. The services PMI increased to 56.2 from 55.2, while the manufacturing PMI eased slightly but remained healthy at 54.9 from 55.1. The manufacturing output sub-index remained firm, while export orders expanded at their fastest pace in six months."

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

"The PMIs reinforce the picture of resilient economic growth, consistent with the RBI's upward revision to its FY2026–27 GDP growth forecast to 7.1% from 6.7% earlier this month. Importantly, price pressures eased, with input-cost inflation falling to its lowest in almost a year and selling-price increases were the weakest since March 2025, according to the PMI surveys."

"This could provide scope for RBI to pause in December following its 25bp hike to 5.5% earlier this month. RBI also shifted its policy stance to calibrated tightening amid concerns that inflationary pressures could broaden out. Further tightening remains a possibility, depending on the inflation outlook. The key determinants will be oil prices, food prices, and credit growth."

"USD/INR has returned to the lower end of the 94-97 trading range over the past six months, supported by RBI intervention and measures to curb USD demand."

"A more hawkish RBI and resilient growth are supportive for INR, although elevated oil prices remain a key headwind, increasing India's import bill and potentially widening the current account deficit. A sustained INR recovery will likely require lower oil prices and more stable portfolio flows. We expect USD/INR to consolidate within the 94-97 range in the near term."

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