The report said the measures could ease pressure on the rupee by improving capital inflows and strengthening the country’s external position.
“The RBI and government’s June measures could turn what could have been a third straight year of balance-of-payments deficit into a small surplus, thereby taking pressure off the rupee,” the report said.
According to the report, the RBI’s decision to bear the full hedging cost for fresh three-to-five-year FCNR(B) deposits until September 30, 2026, could attract potential inflows of USD 40-60 billion. It added that around USD 17 billion had already been mobilised under this route as of July 17, 2026.
The report also said the concessional foreign exchange swap facility for external commercial borrowings by public sector undertakings could attract another USD 15-25 billion in inflows while reducing hedging costs. It added that the expansion of the Fully Accessible Route (FAR) for government securities and the removal of foreign portfolio investment limits on short-term investments would improve the flexibility and accessibility of investments in Indian government bonds.
Further, the report noted that the government’s decision to withdraw capital gains and withholding tax on returns from investments in government securities increases the likelihood of Indian bonds being included in the Bloomberg bond index at its next review. Such inclusion could potentially attract USD 10-20 billion over the next 12-18 months, it added.
The report said the depreciation of the rupee over the past 12-18 months has been driven largely by weaker capital flows rather than weak economic fundamentals. It noted that, in real trade-weighted terms, the rupee was at its most undervalued level since the 2013 taper tantrum as of May 2026.
Looking ahead, HDFC Mutual Fund said the recent policy measures have the potential to strengthen India’s external sector by supporting capital inflows, improving the balance of payments and reducing pressure on the rupee.