The Indian rupee continued its downward slide, hitting a record low of 89.76 per US dollar on Monday. Despite strong macroeconomic indicators—particularly India’s 8.2% year-on-year GDP growth in Q2—the currency struggled to find support in the face of persistent foreign outflows and global dollar strength.
In this detailed report, we break down the latest movement in the rupee, factors driving volatility, and what this means for markets and investors.
Rupee at a Record Low: Key Highlights
- INR depreciated by nearly ₹1 against the USD since November 3
- One of the worst-performing global currencies in 2025, ahead of only the Turkish Lira and Argentine Peso
- Closed at 89.5475, down 0.1% during Monday’s session
- Strong GDP data and rising equities failed to lift the currency
- $400 million in equity outflows on Friday pushed YTD outflows beyond $16 billion
- 10-year government bond yield edged up to 6.553%
Why is the Rupee Falling Despite Strong GDP Growth?
India posted 8.2% year-on-year GDP growth for the July–September quarter—an outstanding performance that propelled equities to record highs. Normally, strong economic numbers boost currency sentiment, but this time the rupee barely reacted.
Here's why:
1. Heavy Foreign Investor Outflows
Overseas investors have been pulling money out of Indian equities aggressively. On Friday alone, foreign institutions sold $400 million, pushing total outflows beyond $16 billion in 2025.
Large outflows weaken demand for the rupee, directly weighing on the currency.
2. Persistent Dollar Strength Globally
The US dollar index (DXY) has strengthened on expectations of delayed Federal Reserve rate cuts, making emerging-market currencies more vulnerable.
3. Higher Domestic Bond Yields Not Enough
The 10-year government bond yield rose to 6.553%, nearing a one-week high. Typically, higher yields attract foreign inflows—but in this case, risk-off sentiment overshadowed yield appeal.
4. Comparative Underperformance Against Global Peers
The rupee has been one of the worst-performing currencies in 2025, outperforming only the Turkish Lira and Argentine Peso. This relative weakness influences trader sentiment and accelerates selling pressure.
Market Reactions: Mixed Signals Across Asset Classes
Equities Surge to Record Highs
India’s robust GDP reading fueled a rally in domestic equities, reflecting optimism about economic fundamentals.
Bonds See Mild Pressure
Yields inched higher as markets reassessed inflation and interest-rate expectations.
Currency Market Remains Under Strain
The rupee continues to bear the brunt of global risk trends and capital movements, suggesting deeper structural pressures.
What Does This Mean for Investors?
Short-Term Outlook
- Expect continued volatility in the USD/INR pair
- Global central bank actions—especially the Fed—will heavily influence direction
- Outflow trends from foreign investors may keep pressure on the rupee
Medium-Term Perspective
- India’s strong growth and stable macro fundamentals could offer eventual support
- A reversal in global risk sentiment or softer US yields could help stabilize the rupee
Conclusion
The rupee’s fall to a historic low of 89.76 per dollar underscores the complex interplay between strong domestic fundamentals and adverse global conditions. While India’s economy continues to shine with impressive GDP numbers and equity market resilience, currency weakness reflects deeper global financial currents—particularly foreign outflows and dollar dominance.
Monitoring upcoming policy announcements, foreign investor flows, and global macro trends will be crucial for understanding the rupee’s trajectory in the weeks ahead.