Depreciation of the Indian currency continued as trading on the second week of 2025 opened, marked by broad-based bids for the US dollar. And with that, the rupee hit a new all-time low of 85.81 on Monday morning, despite efforts by India's apex bank to limit it at the earlier low of 85.80 against the dollar.
The Reserve Bank of India seemed to have stepped in to save the rupee from further slide, but it always comes at a cost. The forex reserves of India dropped to USD 640.279 billion as of December 27, shaving off more than USD 4 billion in that week alone.
Even as state players such as SBI offered the American currency in morning trade to cap losses—probably on behalf of RBI֫—the dollar index kept itself closer to its two-year high.
Back in the equity market, both BSE Sensex and NSE Nifty opened slightly higher in the green. Yet, foreign institutional investors (FIIs) offloading stock is expected to continue. On Friday alone, FIIs shed Rs 4,227.25 crore worth of equity.
Despite this, the Indian government expects more FDI inflows to the country. Citing investors from the GCC, EU, Japan and the US showing interest in India, commerce and industry minister Piyush Goyal on Sunday said that this would drive economic growth.
"I can clearly see FDI in India once again growing rapidly and creating millions of jobs," Goyal said.
However, analysts are a bit more conservative about the markets.
"Markets may see bouts of correction, and investors will continue to maintain caution while keeping an eye on global developments," said Prashanth Tapse, senior VP (research) at Mehta Equities, citing the loss of momentum due to negative outlook and higher domestic valuations, along with uncertainties in incoming Trump administration's trade policies.
Pravesh Gour, senior technical analyst at Swastika Investmart, said that the market would focus not only on the Trump 2.0 administration but also on the upcoming union budget.
Experts en-masse agreed that the rupee-dollar trend in the short term could also weigh in on how the markets would perform.
