The Indian rupee has plummeted to its lowest level in history, trading at 86.20 against the US dollar. The fall is attributed to the strengthening of the US dollar and the withdrawal of foreign investors from Indian stock markets. Additionally, rising crude oil prices in the global market and negative trends in domestic stock markets have further pressured the rupee.
On Thursday, January 9, a Reuters survey predicted that the Indian rupee might weaken further to 86 against the dollar. Within 24 hours, this prediction came true as the rupee dropped by 14 paise on Friday.
Experts warn that this situation has led to a major crisis in India’s capital markets. Along with the rupee’s depreciation, the stock market is also experiencing continuous declines. On Friday, the Sensex fell by 241.20 points, bringing it close to 76,000, at 77,378.91. Over the past three days, the index has lost a total of 820 points, and the market capitalization has decreased by ₹12 lakh crore. Foreign investors have withdrawn ₹12,787.73 crore, contributing significantly to the rupee’s devaluation.
The Modi government has faced criticism from the opposition Congress party regarding the sale of shares by foreign investors. Congress leader Jairam Ramesh commented on social media platform X that foreign lending institutions have withdrawn $2 billion from the stock market in the first few days of the new year, causing further market declines.
The net drop in Sensex for the week ending Friday was 1,844.2 points, and Nifty fell by 573.25 points. Experts believe both the rupee and the stock market will remain unstable in the near future. They advise small individual investors to avoid purchasing shares for now.
Analysts attribute the rupee’s decline to the global strengthening of the US dollar, particularly after Donald Trump’s election as president, and the higher returns on bonds in international markets.
According to data from IDFC First Bank, India’s trade deficit increased by 18.4% from April to November 2024 compared to the same period last year. Additionally, significant foreign investment has been withdrawn from India, amounting to $10.3 billion in the last quarter alone, compared to an inflow of $20 billion in the previous quarter. These factors have exerted considerable pressure on the rupee.
Forex experts warn that this pressure on the rupee may persist due to weaknesses in the domestic stock market, foreign investment withdrawals, and rising crude oil prices. However, intervention by India’s central bank might bring some stability.