Rupee at 90: Billionaire banker Uday Kotak took cognisance of the slump in the Indian rupee to a record low and slide below the psychologically important 90 per US dollar mark. This is the first time that the rupee has breached past this level amid a persistent decline of 5% during the year, making rupee the worst-performing currency this year.
According to Kotak Bank founder and industry veteran, the proximate reason for the fall in the rupee follows the selling by foreign portfolio investors and PE funds under the FDI.
So far this year, FPIs have offloaded ₹148,010 crore worth of stocks by remaining net sellers in seven of the last 11 months. In the two sessions of December, FPI selling stood at ₹4335 crore.
In contrast, the domestic institutional investors (DIIs) have been significant buyers in the market, providing support to the indices and prompting questions about who is making the smarter investment decisions. SIP buying remains near record high levels as investors are confident about the long-term India story amid strong GDP growth and improving corporate earnings.
Who is the smart investor?
In the current backdrop, Kotak believes that foreign investors “seem smarter”. His remarks come as the Nifty 50 index has delivered zero returns in US dollar terms over the past year, despite showing gains in local currency.
To put it in context, foreigners typically measure performance in US dollars. Even if Nifty rose in local currency, the fall in the Indian rupee wipes out gains for foreign investors when converted to dollars. For instance, if the index rises 10% but the rupee falls 10%, then US dollar returns are nil.
“This is a long game,” Kotak, however, added. “It’s time for Indian businesses and investors to shake out of the comfort zone and prepare for global competition and currency volatility.”
What’s next for rupee?
Market analysts have pinned the rupee fall to a lack of clarity on the India-US trade deal and the heavy trade and portfolio outflows.
“The rupee slipping past 90 against the dollar is less about a single bad day and more about stress that has been building up for months. A mix of persistent foreign investor outflows, stalled India–US trade talks and higher US tariffs on Indian exports has steadily pushed the currency to this psychologically charged level. On top of that, strong dollar demand from importers and a wider trade deficit have kept the pressure one-way,” said Akshat Garg, Head- Research & Product of Choice Wealth.
Analysts point out that muted RBI intervention has also contributed to the swift depreciation. With the RBI policy announcement on Friday, markets expect clarity on whether the central bank will step in to stabilise the currency.
Technically, the rupee is deeply oversold, and a move back above 89.80 is essential for any meaningful recovery, said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Meanwhile, Anindya Banerjee of Kotak Securities said that a decisive daily close above 90 may embolden momentum traders and invite fresh speculative flows.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
