Top Wall Street bank pitches options play to ride potential Indian rupee rally to 83

Yahoo

a day ago

By Nimesh Vora
MUMBAI (Reuters) -Goldman Sachs' sales and trading desk is recommending an options play on the Indian rupee that will pay off if the South Asian currency rallies to 83 per U.S. dollar over the next nine months.
The call — effectively a bet on a 3% appreciation in the rupee from its current level of 85.50 — is underpinned by India's improving macroeconomic fundamentals, a revival in foreign inflows, lower oil prices, and the potential for a U.S.-India trade deal.
The rupee has lagged behind its Asian peers this year, showing little response to the dollar index's more than 9% decline.
Goldman Sachs is recommending buying a 9-month USD/INR binary put option with a strike price of 83. A binary put option is a type of digital option that pays a fixed amount if the currency pair settles below the strike level at the expiry of the contract.
"We chose 9-month tenor for the trade as INR typically tends to appreciate during India's financial year end", which concludes on March 31, according to a sales note from Goldman Sachs.
In support of their constructive outlook on the rupee, Goldman Sachs analysts highlighted that India's GDP growth accelerated to 7.4% year-on-year in the March quarter from 6.4% in the previous three months.
Their monthly activity tracker indicates that consumption remained robust in April.
The investment bank's note pointed to a return of foreign equity inflows, with over $4 billion flowing into Indian equities over the past two months. Goldman expects this trend to continue and potentially accelerate, driven by improving corporate earnings.
The possibility of a U.S.-India trade deal and lower oil prices could be other catalysts for the rupee. Goldman said that a rollback of the 10% reciprocal tariff would be seen as a positive development for Indian risk assets and the rupee.
While the U.S. had initially proposed a 26% levy on Indian shipmemts, the country-specific tariffs have been paused until July 8.
On oil, Goldman's commodities research team expects Brent crude to average $60 for the remainder of 2025 and fall to $56 in 2026. Lower energy prices are a net positive for oil-importing countries like India and could support the rupee.
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