J.P.Morgan: Attractive Carry

J.P.Morgan are neutral on INR, noting that "against the prospect for mild INR depreciation into year-end, the carry on offer is attractive. Still, we prefer to wait for oil prices to move lower to enter INR longs."

• "India's current account has returned to a deficit, after an unusual period of surplus, as the economy reopens from COVID-19. If oil prices remain at these elevated levels, further pressure on the INR is likely."
• "A slower pace of foreign inflows into equities has exacerbated the current account effect on BoP. Fortunately, we expect equity inflows to pick up against a packed roster of IPOs and fundraisings. We are not expecting debt inflows due to potential GBI-EM infusion before Q3 2022."
• "Should there be a sudden surge in inflows, RBI will likely prevent sharp appreciation of INR. But protracted intervention is at odds with the central bank's aim to reduce liquidity."