The Reserve Bank of India is due to announce its bi-monthly decision on Wednesday at 10:00 AM IST (04:30 GMT), with the repo rate expected to stay at 5.25% as policymakers retain a data-dependent stance against a backdrop of Middle East-related uncertainty. June CPI rose 4.4% year on year, remaining within the RBI’s 2–6% target band, and the Standing Deposit Facility and Marginal Standing Facility are seen unchanged at 5% and 5.5%. In a Reuters poll, 68 of 72 economists forecast no move. The RBI has held policy steady at three meetings this year and has kept rates unchanged since a 25 bps cut to 5.25% in December 2025.
At the June meeting, the RBI lifted its FY26-27 inflation forecast to 5.1% YoY from 4.6% and trimmed real GDP growth to 6.6% from 6.9%. Markets are also watching FCNR deposit developments: banks have mobilised $32bn via swap windows, while DBS pointed to July debt inflows of more than $2bn, taking FYTD to $7.7bn, alongside $1.5bn in equity flows. DBS said a conservative $45–50bn inflow estimate could be exceeded. In FX, USD/INR is below the 20-day EMA at 95.72–95.73, with the 14-day RSI at 45; resistance sits at 96.00, while support is 94.80 and 94.15.
RBI Rate Decision and Immediate Policy Outlook
Today, the Reserve Bank of India is widely expected to keep the benchmark repo rate unchanged at 5.25%, marking a continued pause in policy. With June inflation coming in at a stable 4.4%, we believe the central bank will maintain its data-dependent stance rather than surprise the market. For derivative traders, this means we should expect a relatively stable interest rate environment in the immediate term, limiting sharp rate-driven swings.
Trading Perspective: USD/INR Derivatives and Volatility Strategies
We see a compelling setup in USD/INR currency derivatives as the pair maintains a mild bearish bias below its 20-day Exponential Moving Average of 95.72. Given that momentum indicators like the 14-day RSI are hovering in a neutral-to-bearish zone near 45, short positions on USD/INR futures look attractive. We should target key downside support levels at 94.80 and potentially 94.15 in the coming weeks.
Because the central bank is unlikely to change its policy rate, we expect implied volatility in rupee-denominated options to compress. Traders can capitalize on this by writing out-of-the-money call options near the 96.00 resistance level to collect premium. Range-bound strategies like iron condors will likely outperform as long as the exchange rate remains capped under the 20-day EMA.
Strong foreign inflows support this bearish view on USD/INR, with debt markets attracting over $2 billion in July alone. Additionally, commercial banks have already mobilized a cumulative $32 billion through special swap windows, bolstering India’s foreign exchange reserves. This steady influx of foreign capital is poised to keep the rupee resilient against the greenback, reinforcing our short USD/INR bias.
