The Indian rupee could appreciate towards the 94 level against the US dollar if strong FCNR(B) deposits and sustained FPI inflows continue, according to Kotak Securities’ Anindya Banerjee.
The 94 mark stands as a critical level for the USD/INR exchange rate, with FCNR(B) inflows and Foreign Portfolio Investment (FPI) flows set to dictate the real impact on the Indian currency, according to Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, speaking to ANI.
“I think we can see the rupee appreciate towards the levels of 94. Technically also 94 is a very important level. If it appreciates beyond 94, we could see a lot of exporter hedging in the market which could drive it down towards even the 92 levels. So I think for now I’ll be watching for 94 as a very important level for USD/INR,” he stated.
With the rupee trading close to the 95 level against the US dollar, Banerjee said that capital inflows remain central to its potential strengthening, provided crude oil prices remain stable in the USD 80 to USD 90 range.
Speaking on the currency’s trajectory, Banerjee noted that substantial foreign flows continue to provide strong support to the domestic unit.
“So currently the Indian Rupee is almost at 95. So I think if you see right now oil just needs to be stable between USD 80 and USD 90 for Brent. The real impact will be done by the FCNR(B) flows as well as the FPI flows,” Banerjee said.
“So close to USD 40 billion has already come in. We could see the numbers swell significantly over the next two months. So that will be a very big tailwind for the Indian rupee as well as the FPI flows continue to remain at the current run rate of around USD 3-4 billion a month,” he added.
Global uncertainties warrant strong capital cushion
Addressing whether lower crude prices reduce the need for large FCNR inflows, Banerjee argued that external uncertainties require keeping a robust capital buffer.
“We can make that argument considering but the whole point is if we get back to the pre-war levels, that’s around USD 70 or below USD 70, then of course we don’t need those kinds of flows. But at this point in time, the situation in West-Asia is far from over. This deal, no-deal, ceasefire/attacks has been going on for a long time,” Banerjee explained.
“We should not be complacent that just because the oil prices are down to USD 80, everything is fine because the flows from the Strait of Hormuz has not really started. So I think this is a cushion that we would definitely need. It’s just not the oil,” he added.
He also pointed to broader macroeconomic risks influencing international capital movements, including US Federal Reserve policy and currency shifts.
“Let’s look at the other factor that is the US interest rate cycle. There is considerable uncertainty around that; whether the Fed will go ahead and hike by September or not. And also regarding the whole yen intervention and the yen carry trade unwind. These are threats to capital flows,” Banerjee added. “So I think it is good to have a strong cushion by September. If that number swells to USD 60 to USD 70 billion that will be a fantastic cushion to have in such an uncertain fiscal year.”
RBI likely to stay on hold for now
On the prospect of central bank intervention, Banerjee stated that it is too early for the RBI to start buying the dollars because it is just at 95 levels.
“The all-time low was just shy of 97. So I think it’s too early. Yes, if it appreciates towards the 90 levels, then we could see the RBI step in because we have to understand in January it was well below 90. It has appreciated or rather depreciated over a very short span of time. I don’t think the current levels are appropriate for RBI to come in aggressively and buy dollars,” he said.
Regarding monetary policy, Banerjee concluded that central banks are likely to maintain status quo while monitoring global developments.
“I don’t think any central bank would be in a hurry to either cut rates or raise rates. So it will be appropriate just to see how things unfold in West Asia like what Fed is doing. I think RBI will follow suit and see how things pan out over the next 3-4 months and then take a call. As of now, I don’t think the RBI is going to change the rates anytime soon,” Banerjee said.
Published on August 3, 2026
