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Informist, Thursday, Oct. 1, 2026

 

By Pratiksha

 

NEW DELHI – The rupee is expected to slide further against the dollar this month owing to high US Treasury yields and persistent foreign portfolio outflows, market participants said. Rising global crude oil prices due to ongoing war in West Asia is also expected to continue exerting pressure on the Indian currency, they said. 

 

The Indian currency is likely to settle at 96.50 a dollar by the end of this month, sharply lower compared to 95.83 per dollar at the end of September, according to the median of estimates from 15 banks, corporates and brokerages polled by Informist. The rupee depreciated 0.7% against the dollar last month, primarily due to a jump in crude oil prices and the dollar index, along with persistent FPI outflows. 

 

"The US 10-year yield is a cause of concern. FPIs (foreign portfolio investors) are also continuously taking money out," Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services Ltd., said. "There seems to be no relief in sight for rupee in the near-term."

 

The seven-month-old war in West Asia has stoked inflation concerns globally, lifting bond yields to multi-decade highs and hurting emerging market assets. The US 10-year Treasury yield hit its ‌highest level in 24 years on Thursday due to a massive bonds sell-off. 

 

The dollar index surged over 2% last month following a 25-basis-point rate hike by the US Federal Reserve. With odds of more rate hikes by the US central bank increasing, market participants expect the dollar to strengthen more going ahead. US Federal Reserve officials have guided for another rate hike of 25 bps in 2026.

 

Market participants expect the rupee to continue being sensitive to the movement in crude oil prices as India is the third-largest oil importer in the world. India's oil imports were at $174 billion in 2025-26 (Apr-Mar), compared to $186 billion in FY25.

 

So far in 2026, the Indian unit has fallen almost 7.2% against the dollar. Brent crude oil prices have jumped almost 30% since the war broke out on Feb. 28. In September, prices rose almost 13% as the US and Iran continued to exchange strikes and peace talks between both nations remained stalled.   

 

Traders' bets against the Indian currency are expected to continue piling up as there seems to be no end in sight to the war, poll respondents said. Hence, the exodus of foreign investors from Indian markets will go on and this will continue to exert pressure on the rupee, they said. 

 

So far in 2026, FPIs have pulled out $22.27 billion from Indian markets, more than double the $10.92 billion they pulled out in the whole of 2025. In September, FPIs withdrew over $6.5 billion worth of funds from the domestic market.

 

"Foreign portfolio investors pulled roughly $6 billion–$7 billion out of Indian markets in September, giving back most of what they brought in during July and August, and we expect that pressure to persist through October," said Anindya Banerjee, head of research - commodity and currency, Kotak Securities. 

 

RBI – THE SAVIOUR

Much of the recent pressure on the rupee has been absorbed by persistent dollar sales by the Reserve Bank of India. And market participants expect the central bank to continue intervening actively, considering its measures to attract foreign capital have collectively drawn inflows over $143 billion between June and Sept. 18. This has bolstered the firepower to support the currency.

 

Nearly 93% of the inflows came from FCNR(B) deposits under the RBI's special swap scheme at $132.98 billion, which closed on Aug. 31. Banks raised $5.32 billion through overseas foreign currency borrowings during the period, while external commercial borrowings by public-sector undertakings were $5.30 billion. 

 

"We expect the RBI to remain active, but the objective is likely to be managing volatility rather than defending a particular exchange-rate level," Amit Pabari, managing director at CR Forex, said. Only three respondents expect the Indian unit to fall to a record low this month. The rupee fell to a lifetime low of 96.9600 on May 20. 

 

In September, the RBI sold over $10 billion in the foreign exchange market to support the rupee, according to dealers. India's foreign exchange reserves were at a three-week low of $765.90 billion as of Sept. 18. The reserves fell by $14.88 billion during the week, the sharpest fall since November 2024.  

 

However, some market participants do not expect the RBI to intervene aggressively and push the Indian unit higher at a time when other emerging market currencies are also under pressure because of global factors. "We expect the RBI to keep leaning against volatility. It will let the rupee adjust gradually to global conditions, but act decisively if the move turns sharp and one-way," Banerjee said.

 

Market participants also keenly await the Reserve Bank of India's Monetary Policy Committee meeting decision on Wednesday, with most expecting a rate hike of 25 basis points. However, the widely expected rate hike is unlikely to push the currency higher unless the pace of monetary policy tightening the RBI signals is more than the market expects.

 

POLL DETAILS

 

Participant	Oct-end	Dec-end
CR Forex	96.60-96.80	97.00-97.20
CSB Bank	96.10	95.75
Finrex Treasury Advisors LLP	96.75	97.25
Globe Capital Market	95.30-96.90	94.00-97.50
HDFC Securities	95.50-96.80	-
IBM India	96.50	97.20
ICICI Bank	96.50	96.50
Karur Vysya Bank	96.00	95.00
Kotak Mahindra Bank	95.00-96.50	96.50-97.00
Kotak Securities	97.00	96.00
LKP Securities	96.75	98.50
Mecklai Financial Services	95.80	95.50
Shinhan Bank India	95.40-96.40	95.80-97.00
South Indian Bank	97.00	97.00
Tamilnad Mercantile Bank	97.00	-
Median	96.50	96.50

 

End

 

US$1 = INR 96.32

 

Edited by Deepshikha Bhardwaj

 

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