Rupee undervalued, falling on BoP strain despite low inflation: Citi's Samiran Chakraborty

• Rupee is undervalued but falling due to balance of payments (BoP) strain, with two consecutive BoP deficits expected.
• The rupee could stabilize near ₹91 by Jan-Mar 2026 if India's BoP moves into surplus, supported by stronger current account flows and capital inflows.
• India's macro outlook for 2026 includes potential growth above 7% and inflation below 4%, though growth may moderate and inflation could edge higher due to base effects.
• This year's 180 bps inflation revision was driven by one-off factors (vegetables, food, GST cuts) unlikely to repeat, making a similar sharp fall improbable.
• The bond market faces challenges from rising government issuance (potentially ₹30 lakh crore by FY27) and redemption pressures, requiring continued RBI support through OMO purchases.

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