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Investing.com - The Indian rupee is vulnerable to further depreciation due to mounting trade-related uncertainty, tight domestic macro policies, and declining capital inflows, according to a new report from BCA Research.
BCA Research recommends investors maintain a neutral-to-underweight position on the Indian rupee versus emerging market Asian peers, citing multiple headwinds facing the currency. The research firm points to US tariffs and potential sanctions on Russian oil imports as significant threats to India’s export competitiveness, with the country’s exposure to IT services adding to the risk.
The potential shift away from Russian crude oil imports would drive up freight costs for India, according to the analysis. This change would likely widen the country’s current account deficit and place additional downward pressure on the rupee in foreign exchange markets.
BCA Research also highlights that tight domestic monetary and fiscal policy measures are contributing to the rupee’s vulnerability. These policy constraints, combined with stretched equity valuations in Indian markets, create challenging conditions for the currency.
The research firm further notes that weakening corporate earnings in India are likely to trigger portfolio outflows from foreign investors, adding another factor that could accelerate the rupee’s depreciation against other currencies in the region.
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