According to a report by the American consumer news and business channel CNBC on October 15, capital outflows and rising energy costs are expected to continue putting pressure on the Indian rupee, despite efforts by the Reserve Bank of India to slow down the depreciation of the rupee.
In the past few days, driven by the latest measures taken by the Reserve Bank of India, the rupee has risen from 96.79 rupees per US dollar to around 95 rupees per US dollar. However, strategists say that while these measures may provide temporary relief, it is expected that the rupee will continue to weaken by the end of this year and in mid-2027. There is also a possibility that the rupee could fall to 100 rupees per US dollar.
S&P Global market intelligence associate Hana Luccini-Scholtz told CNBC that the Reserve Bank of India's move will slow rupee depreciation, but "cannot fully offset pressure from high oil prices, widening current account deficits and a severe global capital flow environment."
Her company expects that by the end of 2026, the rupee will be trading at around 97 rupees per US dollar, and it is expected to drop to 98 rupees by mid-2027. Mizuho Securities, based in Singapore, also predicts that the rupee will fall to 98 rupees per US dollar by the end of 2026 and early 2027. Vishnu Varathan, the company's head of macro strategies for the Asia-Pacific region, made these remarks to CNBC.
Reserve Bank of India resolved to take all necessary measures to ensure orderly functioning of the foreign exchange market, R.K. Das, Deputy Governor of Reserve Bank of India, said in an interview with Moneycontrol on 13th March.
On the 10th, the Indian Reserve Bank announced measures to increase the cost of speculative bets on the rupee and to restrict the re-establishment of foreign exchange derivative contracts that have been cancelled. The Reserve Bank also opened special windows to meet the daily dollar demands of three public sector oil marketing companies, and isolated such transactions from the spot market.
HDFC Securities Research Chief Executive Dewarosh Vaiker told CNBC these measures "bring short-term to medium-term stability, rather than long-term structural support."
Just a few months before these measures were introduced, the Reserve Bank of India launched a special program in June called “Foreign Currency Non-resident (Bank) Deposits”, aiming to encourage non-Indian residents to deposit foreign currencies in Indian banks.
According to a report published by the global brokerage firm Nomura Securities on the 10th, although the plan increased India's Reserve Bank's foreign exchange reserves by $105 billion, global adverse conditions have forced the central bank to intervene 'aggressively' in the spot market in order to cope with the pressure on the rupee.
According to a report by the Indian brokerage firm Ambit Capital on Wednesday, the rupee has fallen by 1.9% against the dollar since the program ended on August 30. Interventions by the Reserve Bank of India to curb the decline in the value of the rupee by selling dollars have resulted in a reduction of $51 billion in foreign exchange reserves as of October 2.
The report also states that India's import coverage is approximately 6.2 months, which is the lowest level since the United States reduced its trade restrictions in 2013.
According to CNBC, India remains one of the world's "fastest-growing major economies," but it is also one of the countries most affected by supply disruptions caused by the war in Iran. Nearly 85% of its fuel needs rely on imports, and before the war, the Strait of Hormuz was a key supply route.
High energy costs, coupled with the significant withdrawal of foreign investors from the Indian capital market due to rising hedging sentiment and a lack of AI-driven investment opportunities, have kept the rupee under continuous pressure.
Indian Prime Minister Narendra Modi called on the public last month to avoid traveling abroad and purchasing gold in order to relieve pressure on the local currency. Similar calls were made by him in May, as the risks posed by the war in Iran to the economy grew.
Luciniakova-Sholsh said that it cannot be ruled out that the ruble may fall to 100 per dollar, and added that this situation could occur if "oil prices rise further, portfolio outflows resume, and the current account deficit exceeds current expectations."
According to data from the Indian depository institution NSDL, as of October 13, foreign securities investors have sold Indian direct stocks worth $32.5 billion this year.
Anand Rathi Global Finance Deputy Managing Director and Head of Fund Department, Haalsirlan Saheeni stated that the Indian Rupee might continue to under pressure in the fiscal year ending March 2027.
