USD/INR to reach 70.50 by year end

There are several positive factors that back INR's outperformance in medium term. Near term, there is an additional block to the government's reform agenda, as it lost in Bihar's regional elections.

In short term, this could effect investor sentiment. Reserve Bank of India was cautious of the currency strength and is not expected to object the way of currency adjustment, if there will be a pick up in the short term outflows.

"Against the backdrop of continued broadly USD strength, we expect USDINR to also move higher, reaching 70.50 by end-2016", estimates Barclays.