- Rupee hit record lows near 96.39 against the US dollar amid West Asia conflict
- Rising crude prices and a stronger dollar pressured the Indian currency's value
- Experts warn excessive rupee depreciation may trigger foreign investor outflows
Rupee has been under intense pressure since the onset of the West Asia conflict, as rising crude oil prices and a strengthening dollar has led to its depreciation. In May, the Indian currency has fresh record lows, with its value plunging up to 96.39 against the greenback.
A section of policymakers have argued that the RBI's intervention should be limited, and the rupee should be allowed to depreciate in view of the global headwinds. However, equity strategist Harsh Gupta Madhusudan cautioned that "too much" of depreciation may impact the FII outflows, which is already a significant point of concern.
"I think the broader point is if you let the rupee depreciate too much, a certain reflexivity kicks in," he said, while speaking to NDTV. "The problem with this, essentially, is that foreign investors whose portfolio values go down, jump on to the bandwagon and exit from Indian markets," he added.
Therefore, this creates a "vicious cycle" where an outflow of dollars leads to a weaker rupee, and a weaker rupee then prompts foreign institutional investors to pull out investments. Hence, the strategist warns against letting rupee slide too far low.
#TheNumbersGame with @RahulKanwal | Rupee under pressure
— NDTV (@ndtv) May 27, 2026
"I think the broader point is if you led the rupee depreciate too much, a certain reflexivity kicks in": Equity strategist Harsh Gupta Madhusudan (@harshmadhusudan) pic.twitter.com/3CxgdlcWe6
ALSO READ: RBI Evaluates Multi-Pronged Measures To Arrest Rupee Slide: Sources
Rupee's Historic Fall
The Indian currency's historic decline has been triggered by a combination of elevated crude, firm US yields and persistent dollar demand.
The rupee settled on a flat note, lower by 2 paise at 95.7 against the US dollar on Wednesday, as renewed tensions between the US and Iran and delays in negotiations kept investors cautious.
Rupee's rout reached an all-time low of 96.96 per dollar last week after opening at 96.85 levels. It settled at record closing low of 96.83 against the greenback. Reports indicated that the Reserve Bank of India's intervention provided some respite.
After breaching past the 96 mark, fears of rupee at 100/$ became stronger. However, the currency seemed to have recovered slightly in the last couple of days after possible RBI interventions and progress in the US-Iran truce discussions.
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