Rupee’s record slide raises market concerns despite calm global cues

The Indian rupee plunged to an all-time low of Rs 89.49 against the US dollar on Friday, 21 November, a sharp fall that unsettled traders even as global market conditions remained largely stable. The weakening currency typically sparks risk-off sentiment in equities amid fears of higher imported inflation, rising input costs and pressure on companies reliant on imports.

What puzzled market participants this time was the absence of external triggers. Analysts at CR Forex Advisors said the rupee’s decline “stood out”, noting that the Dollar Index was steady, crude oil prices were unchanged and other emerging-market currencies showed no signs of strain.

According to the firm, thin dollar supply combined with aggressive buying created a liquidity gap. The Reserve Bank of India, which had quietly defended the 88.80 level earlier, appeared to have stepped back, setting off stop-loss trades and amplifying the fall.

A weaker rupee often weighs on equities, particularly in segments with stretched valuations. Rahul Kalantari of Mehta Equities said a fresh record low “creates risk-off sentiment” among investors concerned about imported inflation and rising corporate costs.

Midcap and small-cap stocks tend to face sharper pressure, he added, as foreign investors typically turn defensive when the rupee hits new lows, eroding dollar-adjusted returns.

Akshat Garg of Choice Wealth echoed the near-term caution, warning of selective FII outflows from rate-sensitive and high-valuation pockets. He, however, stressed that India’s long-term fundamentals remain intact and that any correction is likely to be “shallow” if macroeconomic stability persists.

Others played down the broader market impact. V.K. Vijayakumar of Geojit Financial Services said the current phase of rupee weakness is “unlikely to affect the market significantly”, noting that valuations have moderated. With the global AI-driven rally losing momentum, he expects foreign investors to turn buyers again, which could help steady the currency.

The rupee’s slide is set to create sectoral winners and losers. Export-oriented industries, including textiles, pharmaceuticals, gems and jewellery, IT, chemicals and auto ancillaries, stand to gain from improved rupee realisations.

In contrast, import-heavy sectors such as aviation, oil marketing, electronics, consumer durables and auto manufacturers face immediate cost pressures. Power companies dependent on imported coal and capital goods producers may also see margin stress, while financials could encounter secondary inflationary risks.

Although currency weakness often tempers foreign investor sentiment, analysts expect a more measured response this time. Garg said FIIs will increasingly be guided by global interest-rate signals and domestic earnings rather than currency volatility alone.

Most experts believe the current bout of pressure may not last. A potential India–US trade agreement could help narrow the trade deficit, while softer crude prices, a cooling dollar and steady RBI intervention may offer support. Should these factors align, the rupee is expected to settle into a more stable range over the next three to four quarters.

With agency inputs