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Original headline: Why the rupee remains under pressure despite lower CAD ?
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The rupee rose 53 paise to close at 94.38 against the US dollar on Wednesday, its strongest level in six weeks, as foreign currency inflows tied to Reliance Industries' Jio Platforms IPO and RBI intervention offset weak domestic equities and elevated crude oil prices. The Rs 30,213-crore IPO was fully subscribed within 100 minutes of opening and reached 3.16 times subscription overall, with qualified institutional buyers subscribing 9.42 times their reserved portion. Analysts noted that foreign investors typically sell dollars to buy rupees when joining large IPOs, which increases dollar supply, while the RBI acted to curb spot-market dollar demand from oil companies and excessive volatility.
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The rupee rose nearly 0.5% against the US dollar early on Wednesday to 94.62, a 29-paise gain and a six-week high, helped by foreign currency inflows tied to the Jio IPO, gains at Dalal Street and RBI support. Rising crude prices and a firm dollar limited the gains, with Brent crude up 1.42% to $110.33 per barrel and the dollar index up 0.06% to 101.58. Equities opened higher, with the BSE Sensex up 800 points and the NSE Nifty50 above 23,100, though FIIs were net sellers of Rs 1,148.64 crore on Monday. An analyst expects the rupee to trade within 94.00 to 94.75 against the dollar during the session.
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The Indian rupee traded at 94.81 per dollar, after being Asia's worst-performing currency until a week ago, falling 7% over nine months following a 5% decline in 2025. To defend the psychological 100 level, the RBI mobilised $133 billion through FCNR(B) deposits in June, sold a net $53 billion in FY26, and raised the repo rate by 0.25 percentage points to 5.50%. Net FII outflows reached $32.8 billion in the first 10 months of the calendar year, versus $16 billion in all of 2025, as capital shifted to AI, semiconductors and data centres and US interest rates stayed high. The author argues these measures are only palliative and that attracting and retaining FII inflows matters most, with FII taxation as a key issue. The Finance Minister has hinted at a possible review of long-term capital gains rates for FIIs.
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The rupee gained 35 paise against the dollar over the past week as foreign portfolio inflows returned, with net inflows of $446 million according to NSDL data, though net outflows for October still total about $4.3 billion. Brent crude, trading around $112 per barrel, has risen nearly 14% in October and climbed since July, remaining a key headwind for India, which depends on crude imports. The rupee is trading at 94.93 after facing selling pressure near 94.80, with resistance at 94.50 and 94.20 and support at 95.80, below which it could fall to 96.25. The dollar index has eased from a high of 102.95 to 101.90, but the outlook says it is highly likely to resume its rally. Overall, the rupee could recover toward 94.50-94.20 in the near term, but the broader bias remains bearish.
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