Rupee vs. Dollar: The Rupee is anticipated to appreciate against the US Dollar, reaching 81 by the end of 2024, according to Goldman Sachs. The financial institution cites expectations of substantial foreign capital inflows as the primary driver behind this bullish outlook.

Goldman Sachs economist Santanu Sengupta emphasised the potential for robust equity portfolio flows into India, particularly as the Federal Reserve initiates its interest rate easing cycle in 2024. Additionally, the inclusion of India in JPMorgan's global bond indexes is anticipated to contribute to strong debt inflows.

While expressing optimism about the Rupee's performance, Goldman Sachs acknowledged that it might underperform compared to other Asian currencies. This relative underperformance is attributed to the Reserve Bank of India (RBI) actively accumulating inflows and bolstering forex reserves at every available opportunity.

India's resilience in attracting foreign investments is expected to persist, with the country benefiting from regional supply chain diversification. Goldman Sachs remains more bullish on the Rupee compared to other analysts, who, according to a Reuters poll last month, predicted a year-end value of 82.80 against the Dollar.

As of Tuesday, the Indian Rupee was trading at 83.3375, having experienced a 0.5 per cent depreciation in 2023, marking its smallest annual percentage change in at least two decades. Goldman Sachs foresees the Rupee hovering around 82-83 per Dollar in the next three-to-six months.

India's external balances continue to demonstrate strength, characterised by a low current account deficit, robust public market capital flows, substantial forex reserves, and minimal external debt. As of December 22, the country's foreign exchange reserves reached a 21-month high of $620.44 billion.

To ensure stability, the RBI actively intervenes in the currency markets, preventing excessive volatility in the Rupee's exchange rate. Additionally, Goldman Sachs adjusted its estimates for India's current account deficit, projecting 1 per cent of gross domestic product (GDP) in 2023 and 1.3 per cent of GDP in 2024, down from previous estimates of 1.3 per cent and 1.9 per cent, respectively.

(With Reuters inputs.)