Rupee at 95: Worst-case scenario of 100 moves closer; how bad is it for markets?

The Indian rupee has slipped past the 95 mark against the US dollar for the first time, intensifying concerns over how much further the currency could weaken and raising the possibility of a move towards the psychological 100 mark. The latest slide comes after a fresh round of pressure this year, driven by the Iran war.

Rupee fell about 10% in FY26 and 3.5% since the Gulf conflict began, falling from 85.57 per dollar on April 1 to 90.98 by February 27, a day before the war started, ultimately crossing 95 earlier today. The rupee touched this level even as the Reserve Bank of India (RBI)imposed new limits on onshore positions of banks late on Friday, which forced lenders to offload ‌dollars in ⁠the domestic ⁠market while simultaneously buying in the NDF market.

However, according to a Reuters report, corporates on Monday stepped in to capture the spread by buying dollars onshore and selling in the non-deliverable forward (NDF) market, checking the rupee’s rally and leading to uneven price action across segments.


Along with heavy importer demand from large corporates hedging near-term liabilities, this caused the rupee to give up a large part of its opening rally.

Underlying stresses remain for the rupee

The underlying stresses remain intact, with elevated oil prices, persistent capital outflows, and a strong dollar continuing to weigh on the currency. The breach of 95 marks a shift from earlier expectations, when analysts had viewed that level as a stress scenario. The key focus now is whether the rupee could test 100 under adverse conditions, a level increasingly discussed as a tail risk rather than a base case.

Paresh Bhagat, CIO of Veer Growth Fund and Chairman at Mangal Keshav Financial said such a move cannot be ruled out in a severe scenario. "If disruptions in energy supplies continue and crude sustains above $120, pressure on India's external position could increase meaningfully," he said.

The core vulnerability lies in India's dependence on imported energy. Higher crude prices directly expand the import bill, widening the current account deficit and putting structural pressure on the currency. Even with some cooling in geopolitical tensions in West Asia, oil remains elevated enough to keep this dynamic in place.

Analysts have noted that the rupee is now being driven more by structural imbalances than short-term shocks. Continued foreign portfolio outflows from equities and debt have reduced dollar inflows, while global investors have preferred US assets amid higher yields and relative safety.

A move toward 100 would likely require a combination of factors rather than a single trigger. These include a renewed spike in crude prices, continued foreign outflows, and limited intervention capacity from the central bank.

Some brokerages had earlier flagged that the rupee could weaken steadily over time if external pressures persist, with downside risks building as oil prices stay firm.

At the same time, not all experts see an immediate slide to 100. Independent market expert Adib Noorani said the rupee is currently caught in a “perfect storm” of high oil prices and foreign portfolio outflows, but strong domestic fundamentals continue to offer support.

The RBI’s role

The RBI remains a key variable. Over the past few months, the central bank has occasionally intervened to smooth volatility, and recent actions suggest a willingness to curb excessive speculation and disorderly market conditions.

Last Friday, the RBI directed banks to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each business day, with compliance required by April 10. The move is expected to trigger unwinding of arbitrage positions—trades in which banks seek to profit from the gap between the non-deliverable forward (NDF) and onshore forwards market, bankers said.

That unwinding will likely push banks to sell a significant amount of dollars in the local market, according to Reuters. The stringent curbs aim to limit both the size of speculative wagers and arbitrage positions during a period when the rupee has depreciated rapidly.

“The measure compels lenders to scale back large positions and curbs their ability to build aggressive one-sided bets against the rupee,” said Jigar Trivedi, Senior Research Analyst at IndusInd Securities.

What happens if the rupee hits 100?

The impact on equities is likely to be uneven. Export-oriented sectors such as IT and pharmaceuticals tend to benefit from a weaker rupee, as their dollar revenues translate into higher earnings in local currency terms. Conversely, sectors reliant on imports—including oil marketing companies, aviation, and certain manufacturing segments—could face margin pressure due to higher input costs.

Banks could also see indirect effects through currency-linked exposures and volatility in financial markets, especially if the rupee’s movement triggers broader risk-off sentiment among investors.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)