USD/INR: UBS recommends shorting India’s rupee

Investing.com — UBS Group AG (NYSE:UBS) is advising traders to brief the Indian rupee and cut back their holdings within the nation’s shares. The Swiss banking establishment’s analysis division means that India’s $4 trillion financial system is experiencing a structural slowdown. This downturn is not attributed to cyclical components reminiscent of oil value fluctuations or sluggish authorities expenditure.

The analysis group cites a long-term decline in credit score development, overseas direct funding, export competitiveness, and earnings potential as causes for the slowdown. These components are anticipated to deteriorate additional after Donald Trump assumes the US presidency.

Manik Narain, the London-based head of Rising Market technique analysis at UBS, challenges the traditional perception that India is comparatively insulated from the affect of Trump’s insurance policies in comparison with different rising markets.

He emphasizes {that a} doubtlessly extended interval of excessive US yields might pose a problem to India’s development. This is because of India’s excessive debt service-to-revenue ratio, one of many highest amongst main rising markets.

Over the previous month, Indian shares have seen practically $500 billion wiped off their market worth. This marks the worst begin to a 12 months since 2016, in response to MSCI Inc (NYSE:MSCI).’s index for the nation. The Indian rupee has additionally hit consecutive document lows in opposition to the US greenback, making it the worst-performing forex in Asia.

Moreover, India’s bonds are experiencing their quickest outflows since 2020, as enthusiasm over their inclusion in international bond indexes fades.

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