Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, said the rupee’s fall is being driven by multiple global and domestic factors.
“USD/INR has surged to record highs near 91.70, driven by sustained FPI outflows, adverse global risk sentiment stemming from geopolitics and U.S.–India trade frictions, and a slowdown in exporter dollar conversions even as importer hedging demand remains strong. RBI intervention is helping smooth volatility but is not reversing the trend,” Banerjee said.
He added that in the near term, USD/INR could extend towards 92–92.50, with markets watching progress on trade negotiations and signals from the Union Budget on February 1. “Over the medium term, the rupee looks undervalued, but stabilisation will require improvement in capital flows and global risk appetite,” he said.
Forex experts said the latest leg of weakness reflects heightened uncertainty in global markets, triggering risk-off sentiment and volatile capital flows out of emerging economies like India. Heavy foreign portfolio investor (FPI) outflows from domestic equities, coupled with a delay in clarity on a India–U.S. trade agreement, have added to the pressure.
So far this month, foreign portfolio investors (FPIs) have withdrawn ₹32,253.55 crore from Indian equity market, with gross purchases of ₹1,53,046.26 crore offset by gross sales of ₹1,85,299.81 crore. On January 20 alone, FPIs were net sellers to the tune of ₹2,938.33 crore.
In contrast, domestic institutional investors (DIIs) remained net buyers, helping cushion the impact of foreign outflows. Month-to-date, DIIs have infused a net ₹41,976.70 crore into equities, with gross purchases of ₹2,24,667.96 crore against sales of ₹1,82,691.26 crore. On January 20, DIIs recorded net purchases of ₹3,665.69 crore.
