Indian Rupee: Growth surprise supports range view against US Dollar – Commerzbank

Commerzbank strategists argue that stronger-than-expected Q2 2026 Gross Domestic Product (GDP) at 7.8% yoy reinforces India’s relative growth advantage and reduces expectations of Reserve Bank of India (RBI) easing. They see upside risk to RBI’s FY2026-27 growth forecast, but warn about Oil, food and external demand risks. They maintain a near-term USD/INR range of 94–96, noting modest post-data Indian Rupee (INR) gains.

Rupee aided by robust GDP

"The economy expanded by a stronger-than-expected 7.8% yoy in Q2 2026 (Bloomberg consensus: 7.3%), while Q1 was revised up to 8.6% from 7.8% initially. The expansion was relatively broad-based, pointing to continued strength in both household demand and investment. It underscores the economy’s resilience despite the Middle East conflict and higher energy costs. "

"The strong report puts calendar H1 2026 growth at around 8.2% on a GDP basis and 8.4% on a GVA basis. More importantly, the 7.8% April-June print, the first quarter of FY2026-27, is comfortably above RBI’s 6.7% full-year growth forecast. Some moderation is likely as favourable base effects fade and higher energy costs weigh on real incomes and corporate margins."

"However, given the stronger-than-expected starting point and continued momentum in investment and manufacturing, there is now an upside risk to RBI’s FY2026-27 growth forecast, and the central bank could revise it higher at its 7 October meeting."

"We continue to look for a 94-96 range in the near term. A sustained INR appreciation would likely require a more durable decline in oil prices and an improvement in the external risk backdrop."

"For monetary policy, positive growth momentum further reduces the need for the RBI to provide additional accommodation and gives policymakers more room to focus on inflation risks. RBI is projecting FY2026-27 CPI inflation at 5.0%. It can remain in a wait-and-see mode for now, while a renewed spike in oil prices and evidence of second-round inflation effects remain the key risks."

"For INR, the growth surprise is modestly supportive as it reinforces India’s relative growth advantage, reduces expectations of monetary easing, and could encourage portfolio inflows. USD/INR eased around 0.2% to near 95.20 following the release."