The Worst Is Over For Rupee; Jefferies Sees It At Around 90 Per US Dollar For Next 12 Months
Subdued dollar index, low Current Account Deficit, low oil and precious metal imports, strong service exports, and a potential trade deal with the US will support the rupee.
The worst is over for the Indian rupee after the currency retained its position as the worst performer among major economies for the ongoing calendar year, Jefferies said in its India strategy note. The global brokerage sees it staying at around 90 per US dollar for the next 12 months.
The dollar index, which gauges the strength of the greenback against six major currencies, will likely be softer and stay below the 100-mark, according to Jefferies. This is a positive for the Indian unit.
India's current account deficit is estimated to be 0.5% of the GDP for financial year 2026 and 0.6% for financial year 2027. The CAD levels are the best for in past 20 years, according to the brokerage. Low oil prices and strong service exports are the main reasons behind such low CAD levels.
Apart from low oil prices, India has significantly lowered oil usage. It's down to 450 million barrels per $1 trillion GDP from 1,161 million, Jefferies said.
More over India's gold and silver import declined 4% on the year during April–September, 2025 amid a 23% surge in gold prices. The decline indicated that there is a shift in India's household savings and consumption, Jefferies said.
Gross foreign-direct investment flows to the country rose 14% in financial year 2025 to $81 billion, meanwhile net FDI flows are at $1 billion, the lowest in over two decades, Jefferies noted. However, the trend in net FDI flow is reversing as three large external investment announcements happened in India's financial segment.
Foreign portfolio investors have been pulling out money from India since October, 2024, which weighed on the Indian currency. Jefferies expect they will start reinvesting money as most of the FPIs have low exposure to the country's stock markets.
The Indian currency may gain significantly against the US dollar when India will reach a trade deal with the US. The potential trade deal may also attract back flows into Indian equities.
The Indian currency settled 13 paise stronger at 88.57 a dollar on Tuesday.
