Indian rupee to gauge sustenance of foreign flows, bonds back to supply worries

In fixed income, bond market investors will monitor demand-supply dynamics, ⁠which could prove key in determining the direction of bond yields.

The rupee closed at 90.6550 on Friday, up over 1% on the week.

The U.S. and India unveiled an interim trade framework on Friday, building on an initial announcement earlier last week. While the ‌breakthrough has lifted ‌sentiment on Indian assets, analysts remain cautious about its impact on portfolio flows.

Foreign investors have net bought nearly $900 million of Indian stocks so far in ‌February, after pulling $4 billion last month, though they have sold $19 billion so far in 2025.

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“While the currency (INR) could trade more stably for a while, especially if the drawdown in risk extends, spot upside is likely to prove limited,” analysts at Goldman Sachs said in a note.
In global markets, the focus this week will be on the release of ​key U.S. economic data alongside reactions to elections outcomes in Japan and ​Thailand. BONDS

The 10-year benchmark 6.48% 2035 yield settled at 6.7363% on Friday, notching its second consecutive weekly ‌rise, after the ‍Reserve Bank of India’s monetary policy decision.

The central bank held rates at 5.25% as ‍expected but offered no fresh liquidity support. Traders had expected tweaks to ‌liquidity rules to ease deposit tightness amid rising yields and credit growth.

Traders expect the yield to move in a 6.71%-6.80% range this week, with sellers in the driving seat. On Friday,

With the budget and the central bank policy behind, the market focus will be on debt supply.

The MPC is set for a prolonged pause, with the RBI focusing on liquidity via open market purchases and FX swaps, though higher FY27 borrowing could add upward pressure on yields, said Puneet Pal, PGIM India MF.

India aims to gross borrow ‍a record 17.20 trillion rupees ($189.70 billion) next financial year, with net borrowing of 11.73 trillion rupees. India’s financial year starts in April and runs through March.

RBI Governor Sanjay Malhotra said ‍the focus on ⁠the size of gross borrowing could ⁠be misleading and that net borrowing provides a more accurate assessment of the fiscal position.

“Looking at gross borrowing is not the correct way because there are many more redemptions next year than in the current year.”

KEY EVENTS: India January retail inflation – February 12, Thursday (4:00 p.m. IST) U.S. December import prices – February 10, Tuesday (7:00 p.m. IST)

December retail sales – February 10, Tuesday (7:00 p.m. IST) January non-farm payroll and unemployment rate – February 11, Wednesday (7:00 p.m. IST) Initial weekly jobless claims for week to February 7 – February 12, Thursday (7:00 p.m. IST) January existing home sales – February 7 – February 12, Thursday (8:30 p.m. IST)

January consumer price inflation – February 13, Friday (7:00 p.m. IST) (Reuters poll: 2.5%)