Top 5 reasons behind the Indian rupee’s record fall and what it means

Dubai: The Indian rupee weakened to a fresh record low for the fourth consecutive session on Tuesday, slipping to 90.82 per US dollar, eclipsing its previous low of 90.78 hit on Monday. Persistent dollar demand from foreign investors, delays in a potential India–US trade deal, and heightened uncertainty over global trade policy have combined to pressure the currency.

The rupee has now lost about 6% against the dollar this year, making it Asia’s worst-performing currency. India remains the only major economy without a bilateral trade agreement with the US, a factor that has deepened investor concern over export competitiveness amid steep US tariffs.

1. Trade deal uncertainty clouds outlook

Expectations of an India–US trade pact have repeatedly faltered, leaving traders wary of near-term inflows. The uncertainty has intensified as the US continues to impose higher tariffs on several Asian exporters, eroding India’s export margins.

2. Capital outflows add pressure

Global funds have withdrawn roughly $1.6 billion from Indian equities so far in December, reversing two months of inflows. They have also trimmed holdings in local debt. The pullout highlights limited foreign appetite for rupee-denominated assets as investors gravitate toward safer dollar positions.

3. Limited RBI intervention

The Reserve Bank of India appears reluctant to intervene aggressively, prioritising economic growth over rupee defence. Analysts at major brokerages expect the currency to remain under pressure through year-end, with some projecting it could touch 91 per dollar before December 31.

4. Dampened market sentiment

The rupee’s extended weakness is influencing equities. India’s NSE Nifty 50 has dropped about 1.7% from near-record highs in November as nervousness builds. The slide threatens to undermine momentum in India’s $5.2 trillion stock market, which had only recently begun to recover.

The currency’s performance also exposes India’s reliance on foreign capital to fund its current-account gap and corporate borrowing, leaving markets vulnerable to global interest-rate shifts and trade headlines.

5. Winners and losers from a weaker rupee

Not all sectors are losing ground. Export-oriented industries like technology and pharmaceuticals are benefiting from the currency’s slide. The Nifty IT index has risen about 14% since late September, in line with the rupee’s decline.

Rupee’s one-month weakness shows steady loss

For UAE-based expats, the rupee’s weakness has made remittances more attractive. The exchange rate moved from 24.05 per dirham on November 17 to 24.64 on December 16, reflecting a gradual but sustained slide. The steady increase over a month highlights how persistent global volatility and domestic outflows continue to weigh on the currency.

Until clarity arises on trade negotiations and global risk appetite improves, the rupee is likely to remain under pressure, keeping investors cautious through the end of the year.

- With inputs from agencies.