BofA More Constructive On INR Outlook

"We think recent correction in INR valuation and near-term improvement in CA and capital flows tilt the risk-reward in favor of INR appreciation. Current account seasonality improves in this quarter after seasonal deterioration in 4Q on festive demand. This year, lower oil prices should further add to this seasonality. RBI has successfully reduced INR volatility, reserves have recovered partially and INR valuation concerns should ease as REER has corrected. Lastly, CNY/INR cross back to recent highs and sharper depreciation may not be warranted in the near term. Debt inflows have started to trickle-in as India bonds still offer better carry compared to the region with low currency volatility."