The Indian Rupee (INR) extended its downward trajectory, touching a fresh historic low of 91.19 against the US Dollar (USD) in early trading on Tuesday. This persistent weakness has resulted in a 6% depreciation for the currency in the year-to-date (YTD) period, sending ripples across the entire investment landscape.
Market Fallout: From Stocks to Precious Metals
The rupee's slide is having a direct and indirect impact on various asset classes. While forex investors face immediate losses, the decline is also influencing returns from gold, silver, mutual funds, and the stock market. Experts point out that the falling rupee has soured sentiment among Foreign Institutional Investors (FIIs), triggering sustained selling in Indian equities.
Sandeep Pandey, Co-founder of Basav Capital, explained that the rupee's weakness has been a key factor in dampening FII confidence. "Since July 2025, FIIs have remained net sellers," he noted, adding that domestic institutional investors (DIIs) have been net buyers in an attempt to counter this outflow, but the selling pressure has prevented indices from sustaining higher levels.
Gold and Silver Shine Amidst Currency Turmoil
Interestingly, the weak rupee is proving to be a boon for precious metals. Anuj Gupta, Director at Ya Wealth, stated that gold and silver prices are on an uptrend as both the USD and INR face selling pressure. "The US Dollar Index recently slipped below 98, while the rupee hit its new low. This combination is fueling demand, allowing gold and silver investments to grow significantly," he said.
Mutual Funds: A Mixed Bag for Investors
The effect on mutual funds is nuanced, depending on an investor's horizon. Jitendra Solanki, a SEBI-registered expert, clarified that while FII selling has curbed the sharp rise of stocks and affected short-term mutual fund returns, long-term investors may benefit. "They are accumulating more NAVs (Net Asset Values) for their fixed investment amount. Over the long run, a higher number of NAVs is expected to yield better returns," Solanki explained.
The Road Ahead: Trade Deal and Economic Momentum
Analysts identify specific factors behind the rupee's pressure. Amit Pabari, MD of CR Forex, attributed the weakness primarily to tariff-related concerns and foreign investor selling, rather than weak economic fundamentals. He identified 90.00–90.20 as a crucial support zone for the rupee in the near term.
Looking forward, a resolution to trade tensions could be pivotal. Analysts at Bank of America (BofA) emphasized that the rupee remains sensitive to portfolio flows influenced by tariffs. "The finalisation of an India-US trade deal, expected to reduce tariffs, would be important in reducing uncertainty for equity investors," they stated. A pick-up in domestic growth momentum is seen as another key factor for supporting corporate earnings and stabilizing markets in the coming year.
Disclaimer: This story is for educational purposes only. The views and recommendations are those of individual analysts or broking companies. Investors are advised to consult certified experts before making any investment decisions.
