The potential dollar purchases by the Indian central bank to re-build its reserves may cap gains in the rupee, offsetting a boost from improving external finances and higher equity flows, according to Goldman Sachs Group Inc.

Share Market Live

NSE

With the central bank expected to replenish reserves after defending the currency last year, the rupee is unlikely to benefit, economists led by Santanu Sengupta wrote in a note dated May 16.

ALSO READ | Mexico's mighty peso hits 7-year record high against US dollar

The rupee is expected to underperform Asian peers and trade at 83 against a dollar in the next three months, according to Goldman Sachs. It’s among the worst-performing Asian currencies in the last one year.

The Reserve Bank of India has started augmenting its reserves stockpile to ward off any speculative attack on the rupee. India’s forex reserves surged to about $600 billion early this month after dropping to $525 billion in October.

As oil prices ease, Goldman Sachs economists sees the nation’s current account deficit narrowing to 1.4 percent of the gross domestic product this year, compared with 2.4 percent in 2022, helped by remittances from Indians abroad and services exports.

ALSO READ | Yuan weakens toward key psychological level amid data misses

(Edited by : Anshul)