Rupee cracks 91.95 per dollar as equity selloff deepens: Is the currency sending a bigger market warning?
The Indian rupee fell to a record low of 91.95 against the US dollar on January 23, marking one of the sharpest weekly declines for the currency in recent months. The move reflects a toxic mix of equity market weakness, foreign fund outflows, importer dollar demand and speculative positioning.
With this decline, the rupee is now down more than 2% in January alone, adding to its 5% fall through 2025, underscoring how sustained capital outflows are steadily eroding confidence in the currency.
Currency traders said the fall was not driven by one single factor but by a combination of flows and sentiment deterioration across markets.
Equity market weakness worsens pressure on the currency
One of the most immediate triggers behind the rupee’s slide has been the sharp selloff in domestic equities.
Foreign investors have already pulled out nearly $3.5 billion from Indian equities in January, pushing the Nifty 50 down almost 5% for the month. The selling accelerated this week, with the index down more than 3% in just a few sessions, increasing demand for dollars and amplifying pressure on the rupee.
The benchmark index also fell 0.8% on Friday, after fresh concerns emerged around Adani group companies.
Markets reacted negatively after the US Securities and Exchange Commission sought court permission to personally email summons to Gautam Adani, reviving uncertainty around the conglomerate and weighing on broader sentiment.
“The Adani issue has added another reason for the market to buy (into dollar/rupee),” said Anil Bhansali, Head of Treasury at Finrex Treasury Advisors.
“You can see the pressure in the way buying keeps coming in at all levels.”
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Here’s what happened today and why traders reacted
Currency traders tracked three clear signals through the session:
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Persistent dollar buying by importers, especially bullion and commodity traders
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Continued FII selling in equities, keeping demand for dollars elevated
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Weak market sentiment after Adani-linked headlines triggered another round of risk-off positioning
As equities weakened and overseas investors continued to sell, dealers noted that every intraday dip in USD/INR was being aggressively bought, suggesting the market is positioning for further rupee weakness.
This behaviour typically indicates that traders are no longer expecting short-term stability but instead preparing for prolonged currency stress.
Capital flows remain the biggest vulnerability for the rupee
Economists believe the rupee’s decline reflects deeper structural pressure rather than just short-term panic.
Portfolio equity outflows reached a record $18.9 billion last year, and inflows via external commercial borrowings (ECBs) have remained subdued. That has left India increasingly dependent on domestic flows to stabilise markets.
Key factors weakening the currency include:
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Persistent FII selling in equities
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Muted foreign debt inflows
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High demand for dollars from importers
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Speculative offshore positioning against the rupee
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Weak global risk sentiment
With global investors becoming more selective about emerging market exposure, the rupee is now more sensitive to domestic shocks.
RBI steps in, but intervention only slows the fall
Market participants confirmed that the Reserve Bank of India has intervened multiple times this week to smooth volatility and slow the pace of depreciation.
Traders said the central bank sold dollars aggressively on at least two occasions, but the impact has so far been limited.
While intervention has helped curb extreme volatility, it has not reversed the trend, suggesting the RBI is allowing gradual depreciation while preventing disorderly movement.
This approach signals that the central bank is balancing two priorities:
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Avoiding panic in currency markets
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Conserving reserves for periods of extreme stress
What this means for traders in the short term
For short-term traders, the rupee’s fall creates both risk and opportunity.
Currency volatility tends to:
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Increase hedging demand in futures and options
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Drive higher intraday swings in USD/INR
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Impact sectors sensitive to currency moves such as IT, metals and pharma
Export-oriented stocks often benefit when the rupee weakens, while import-heavy sectors such as aviation, oil marketing companies and capital goods may come under pressure.
With the rupee already near 92, traders are closely watching whether psychological levels like 92.50 or 93.00 come into play next.
Impact on investors and portfolios going forward
For long-term investors, the falling rupee carries mixed implications.
On the positive side:
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IT exporters, pharma companies and global revenue firms could see earnings tailwinds
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Export-heavy sectors may attract defensive buying
On the negative side:
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Continued FII selling can weigh on overall market valuations
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Imported inflation risks could re-emerge
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Foreign fund flows into equities may remain cautious
If equity markets fail to stabilise and foreign outflows persist, the rupee could remain under pressure well into the coming weeks.
Bigger message markets are sending
The rupee’s move is not just about currency—it is also a reflection of risk sentiment across Indian assets.
When equities weaken, foreign flows reverse, and uncertainty rises around corporate governance and geopolitics, the currency becomes the first visible pressure point.
Unless equity flows stabilise and global risk sentiment improves, the rupee is likely to remain volatile — making currency movements one of the most important signals investors must track in the coming days.
