New Delhi, Sept. 16 -- Yield differentials and currency risk may be flying under the radar for most investors, but country head of Jefferies India, Aashish Agarwal, considers them a critical blind spot for the market.

Narrowing yield spreads between the US and India put direct pressure on debt flows and create indirect currency risks for equities. To curb sharp rupee depreciation and narrowing yield differentials, a domestic rate hike could eventually be on the table.

However, Agarwal emphasizes that foreign portfolio investors (FPIs) are primarily watching currency stability. "Currency stability-not yield spread alone-is the key trigger for FPIs. If foreign currency reserves keep the rupee steady, outflows remain manageable."

Looking ...