3 min readMumbaiOct 12, 2026 07:51 PM IST
The rupee appreciated 95 paise, logging its steepest single-day gain in more than six months, to close at 95.78 against the US dollar on Monday after the Reserve Bank of India (RBI) introduced several measures aimed at supporting the domestic currency.
“The Indian rupee emerged as the strongest performer among its Asian peers, supported by the RBI’s targeted measures to curb speculation and contain volatility in the forex market,” said Dilip Parmar, Senior Research Analyst, HDFC Securities. A pullback in crude oil prices, driven by expectations of improving supply conditions, further aided sentiment. However, weaker domestic equities and continued foreign fund outflows weighed on the currency, limiting its gains after the initial rise.
According to Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities, the RBI’s measures are expected to ease pressure on the spot market and curb speculative dollar buying, supporting the rupee in the near term. However, a sustained recovery will depend on foreign institutional investor (FII) flows, crude oil prices and broader dollar movements.
On October 10, with the rupee inching closer to the 97-per-dollar mark and crude oil prices surging above $100 per barrel, the RBI tightened its grip on the rupee derivatives market. It introduced a package of regulatory measures aimed at strengthening market discipline, curbing excessive speculative activity and improving transparency in foreign exchange transactions.
The central bank announced restrictions on rebooking cancelled foreign exchange derivative contracts, lowered the threshold for transactions permitted without establishing underlying exposure, strengthened documentation requirements and introduced a new Foreign Exchange Risk Reserve (FERR). The changes could significantly alter how banks, corporations, financial institutions and currency traders manage their foreign exchange positions.
Forex reserves fell by $12.95 billion to $734.60 billion in the week ended October 2. The rupee had remained under pressure despite inflows of more than $143 billion under the FCNR scheme.
Meanwhile, the BSE Sensex declined 0.76%, or 547 points, to 71,924.68 on Monday. The NSE Nifty fell 0.70%, or 157 points, to 22,363.35.
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“Indian markets failed to hold on to early gains as sentiment weakened amid a rise in the 10-year bond yield to a three-year high and continued FII outflows driven by external uncertainties. The rupee rebounded after the RBI opened a special window for oil marketing companies’ dollar requirements and tightened hedging norms, helping ease pressure on the currency,” said Vinod Nair, Head of Research, Geojit Investments.
Banking stocks led the decline after the RBI raised the daily cash reserve ratio (CRR) maintenance requirement to absorb surplus liquidity, while investors awaited domestic consumer price index (CPI) inflation data for clues on the scope for further monetary tightening.
“The Middle East remains a key overhang, with continued Houthi attacks on Saudi and regional energy infrastructure keeping concerns over potential supply disruptions and elevated crude oil prices alive. Large-cap stocks remained under pressure from foreign fund selling, while mid- and small-caps outperformed on expectations of a stronger Q2FY27 earnings season,” Nair said.
