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- Expect 10yr benchmark bond yield to trade in a range of 6.90% to 7.25% over the course of the next one month
Puneet Pal of PGIM India Mutual Fund expects yields to keep trending higher as the RBI starts monetary tightening from its June policy meeting, with policy rates possibly rising 50-75 bps by the end of 2026. Money market yields up to one year, near 8%, are viewed as attractive for short-term investors. During the week, government bond yields rose 3-6 bps as the INR hit a record low of 96.83/USD and the RBI announced a USD 5bn buy/sell swap. Analysts expect the balance of payments deficit to be around USD 50bn, so measures to attract dollar inflows may soon follow, though he sees no comparison with 2013 since inflation is below 4%.
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India's industry body ASSOCHAM welcomed recent Reserve Bank of India (RBI) and Finance Ministry measures to address rupee volatility and FPI flow swings, and called for further tax rationalisation and simpler rules to attract stable long-term foreign capital. It praised the Income-tax Amendment Ordinance, 2026, which exempts FPI investments in government securities from tax on interest and capital gains from April 1, 2026. ASSOCHAM also urged considering an SBI Research proposal to extend the long-term equity holding definition to two-three years, with incentives for such investments. It noted the rupee had recovered nearly 2% from recent lows, and blamed global factors such as high US bond yields, elevated crude prices and a shift of capital toward AI and technology for FPI volatility.
- Rupee falls 3 paise to close at 94 . 92 against US dollar
The rupee settled 3 paise lower at 94.92 per US dollar (provisional) on Monday, snapping a six-session winning streak as a sharp fall in Indian equities and a rebound in crude oil prices weighed on the currency. Foreign institutional investor outflows and high crude prices continued to pressure the rupee, which had gained about 2% in the week ended October 16 on RBI measures to curb spot dollar demand. Brent crude traded at $108.58 per barrel, while the Sensex fell 876.37 points to 73,852.90 and the Nifty dropped 257.20 points to 22,888.95. Analysts said RBI measures may steady short-term moves, but a sustained recovery depends on lower oil prices and better foreign capital flows. India's forex reserves fell $8.578 billion to $726.027 billion in the week ended October 9.
- ASSOCHAM calls for tax simplification , long - term holding incentives to strengthen capital flows
ASSOCHAM has urged further tax rationalisation and simpler, standardised tax rules to attract stable, long-term foreign investment into India. It welcomed recent RBI and government measures to stabilise the rupee and the Income-tax Amendment Ordinance, 2026, which exempts FPI investment in government securities from tax on interest and capital gains from April 1, 2026. The body also backed the government's consultation on long-term capital gains tax and securities transaction tax ahead of the Union Budget 2027-28, and proposed extending the definition of long-term equity holdings to two-three years with incentives. ASSOCHAM cited the rupee's recovery of nearly 2 per cent from recent lows and a 7.1 per cent GDP growth projection for FY27, while noting that high US bond yields, elevated crude prices and a shift towards AI-related investments had driven volatility in FPI flows.
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