Mumbai, October 28, 2025 – The Indian rupee tumbled to a six-month nadir of 84.15 against the US dollar on Tuesday, succumbing to a relentless sell-off triggered by massive foreign institutional investor (FII) outflows, escalating US Treasury yields, and lingering geopolitical tremors from the Middle East. The local unit depreciated by 28 paise from Monday's close of 83.87, marking its weakest level since April 2025 and amplifying concerns over India's external vulnerabilities amid a festive-season slowdown.
In a frenzied trading session at the Interbank Foreign Exchange Market, the rupee opened at 83.95 but swiftly eroded under pressure from dollar bids by importers and oil refiners, who rushed to cover exposures as crude prices hovered near $85 per barrel Brent. "The FIIs are on a fire-sale mode, dumping equities and bonds alike—over ₹25,000 crore ($300 million) pulled out in October alone," said Amit Pabari, Managing Director at CR Forex Advisors, attributing the slide to a "perfect storm" of global factors. Data from the National Securities Depository Limited (NSDL) confirmed FIIs offloading ₹12,450 crore in equities last week, the steepest weekly exit since March.
The depreciation comes against a backdrop of strengthening dollar sentiment, fueled by Federal Reserve Chair Jerome Powell's hawkish undertones in a Jackson Hole speech echo, hinting at a prolonged pause on rate cuts amid sticky US inflation at 2.7%. The benchmark 10-year US Treasury yield spiked to 4.35%, luring capital away from emerging markets like India. Compounding woes, China's stimulus-fueled yuan rally has diverted Asian flows, while Israel's strikes on Iranian oil facilities have ratcheted up risk premiums, per Bloomberg indices.
For India's $3.9 trillion economy, the rupee's frailty spells headwinds. The Reserve Bank of India (RBI) intervened aggressively, reportedly selling $1.2 billion in spot and forward markets to stem the freefall, bolstering its forex reserves to $652 billion—the world's fourth-largest. "We're committed to orderly market conditions; volatility is contained," RBI Governor Shaktikanta Das reassured in a midday statement, alluding to potential tweaks in the liquidity adjustment facility to absorb rupee pressures without depleting reserves further.
Market watchers eye the rupee's next support at 84.50, with resistance at 83.75. Equity benchmarks mirrored the gloom: the Sensex plunged 567 points (0.85%) to 65,432, while Nifty50 shed 0.9% to 19,542, dragged by IT and auto heavyweights sensitive to currency swings. Banking stocks bucked the trend, buoyed by expectations of higher net interest margins from a robust dollar.
Analysts remain divided on the outlook. "Short-term pain, but fundamentals intact—current account deficit at 1.2% of GDP and robust services exports cushion the blow," opined Radhika Rao, Executive Director at Deloitte India. However, Emkay Global's Sandeep Patel warns of a "contagion risk" if US yields breach 4.5%, projecting the rupee at 84.75 by Diwali if outflows persist.
As traders digest the rout, policymakers in New Delhi convene an emergency huddle Wednesday to mull capital controls and export incentives. For Indian households, already reeling from imported inflation, the weaker rupee means pricier gadgets, gold, and fuel—dampening festive cheer. In Mumbai's bustling Dalal Street, the message is clear: in the currency coliseum, the dollar reigns supreme, and the rupee's fightback is far from over.
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