Market participants said the central bank’s dollar sales and swap operations helped stabilise the currency and manage liquidity amid pressure from higher borrowing plans.
| Photo Credit:
Yields of Government Securities (G-Sec) hardened on Monday as the Union Budget for FY27 proposed a higher Government borrowing programme. However, the rupee recovered lost ground after reports of RBI intervention in the forex market.
The Union Budget for FY27, announced on February 1 (Sunday), has pegged the Government’s gross market borrowing higher at ₹17.2 lakh crore, up from ₹14.8 lakh crore in FY26.
10-year benchmark
Yield of the 10-year benchmark G-Sec (6.48 per cent 2035GS) touched an intraday high of 6.78 per cent, the highest level in about a year, to close at 6.77 per cent, up 7 basis points over the previous close.
The price of the aforementioned G-Sec fell by about 50 paise to close at ₹98.09, down from its previous close of ₹98.59. Bond yield and price are inversely correlated, moving in opposite directions.
Expert view
Ajay Manglunia, Executive Director, Capri Global Capital, noted that the borrowing number for FY27 is higher even as the fiscal deficit at 4.3 per cent is lower by 10 basis points (against the FY26 level of 4.4 per cent).
“There’s been constant forex intervention by RBI to curb volatility in the USD/INR pair. This is also drying up rupee liquidity. The borrowing programme has been smooth only because the RBI has infused a lot of liquidity.
“Going forward, yields are likely to move in the 5-10 basis points band on either side. G-Sec yield rise could be kept under check given that the Government has a massive borrowing plan next year,” Manglunia said.
Rupee rebound
Meanwhile, the rupee recovered smartly, closing 48 paise stronger on apparent RBI intervention in the offshore and spot markets. The Indian currency closed at 91.5125 per US Dollar, down from its previous close of 91.99.
Intraday, the rupee traded between 91.4325 and 91.8325 per USD.
Forex assessment
Abhishek Goenka, Founder and CEO, IFA Global, observed that overall, today’s move underscored that USDINR remains heavily policy-managed around key psychological levels, particularly in periods of heightened fiscal and market sensitivity.
“While underlying global and domestic pressures persist, the RBI’s intervention ensured an orderly adjustment, anchoring near-term rupee sentiment even as fixed-income markets digested the Budget’s borrowing signals,” he said.
Goenka noted that the decisive RBI intervention dominated post-Budget price action in the forex market. The currency strengthened by around 40–42 paise, supported by dollar sales near the 91.80 level, which can widely be attributed to the central bank stepping in to smooth volatility following the Union Budget announcement, he added.
Goenka assessed that the RBI’s mid-term USD/INR buy–sell swaps helped manage liquidity amid pressure in the bond market.
“With government borrowing planning to borrow a record Rs 17.2 lakh crore, bond yields moved higher, but the RBI’s swap operations helped cushion rupee liquidity and prevented spillover stress into the FX market. This reinforced confidence that the central bank remains proactive in managing both currency stability and system liquidity,” he said.
Published on February 2, 2026
