Hits Record Low as US Tariffs and FII Outflows Bite
India ,Dec 16 : The Indian rupee slipped past the critical 91-mark against the US dollar on Tuesday, marking an unprecedented decline and extending losses for the fourth consecutive trading session. The currency has now emerged as Asia’s worst-performing currency in 2025, weakening nearly 6% against the dollar amid mounting pressure from steep US tariffs and the absence of an India–US trade agreement.
The rupee touched an all-time low of 91.03, surpassing its previous record of 90.78 recorded a day earlier. The sharp fall was driven by strong dollar demand, likely maturity of positions in the non-deliverable forwards (NDF) market, and sustained foreign institutional investor (FII) outflows. Over the past five trading sessions alone, the rupee has depreciated by more than 1%.
Market experts noted that the decline came despite trade data coming in better than expected. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd., said the sharp weakness was surprising and attributed it partly to the covering of short positions. He added that persistent FII selling has created a vicious cycle, further dragging down the local currency.
India has been particularly affected as it remains the only major economy without a trade deal with the United States, even as Washington has imposed tariffs as high as 50% on Indian exports. These measures have weighed heavily on market sentiment and capital flows.
Despite the sharp depreciation, economists believe the rupee’s fall has not significantly hurt the broader economy so far. The Reserve Bank of India has largely refrained from intervening, supported by low inflation and strong macroeconomic fundamentals. India’s trade deficit narrowed to a five-month low of $24.53 billion in November, helped by lower gold imports and a pickup in exports to the US. Inflation remained well below the RBI’s 4% target, while GDP growth stood at 8.2% in the July–September quarter, the fastest in six quarters.
However, the weakening rupee has begun to impact the stock market. Foreign investors have withdrawn about $1.6 billion from Indian equities in December, reversing earlier inflows, with additional outflows from the debt market. The benchmark Nifty 50 slipped from near record highs, reflecting cautious sentiment amid global uncertainty and domestic capital flow pressures.
On the positive side, a weaker rupee has boosted export-oriented sectors, particularly IT. The Nifty IT index has risen around 14% since late September, benefiting companies with significant overseas revenue exposure.
Analysts expect equity returns to remain selective, advising investors to focus on sectors that benefit from currency depreciation as markets navigate tariff pressures, capital outflows, and global volatility
