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Informist, Monday, Feb. 2, 2026

 

By Pratiksha

 

NEW DELHI – After logging its worst monthly fall in over three years in January, the rupee may take a breather and stabilise this month, likely on the back of the Reserve Bank of India's active intervention. However, the depreciation bias for the Indian currency will persist, given the looming uncertainty over the trade deal with the US and strong foreign portfolio outflows. 

 

The Indian unit may settle at 91.50 a dollar by the end of this month, above 91.98 at the end of January, according to the median of estimates of 17 respondents from banks and brokerages polled by Informist.

 

The rupee declined 2.4% against the dollar in January, falling to a record low of 91.9950, owing to strong foreign portfolio outflows from domestic equities and increased hedging activity by importers, dealers said. Since the rupee has already declined significantly, market participants expect the central bank to step up its support for the Indian unit and prevent a further decline. Case in point: The rupee posted its biggest single-day gain in over six weeks on Monday, thanks to the RBI. 

 

"Over the past month, the central bank's presence was thin in the market, allowing the rupee to find its value based on market demand and supply," Dilip Parmar, currency analyst at HDFC Securities, said. "While their current priority is simply smoothing out volatility, we expect the RBI to shift to a more aggressive intervention stance if the currency faces disorderly pressure in the coming weeks."

 

Market participants highlighted that the recent jump in India's foreign exchange reserves will also bolster the central bank's ability to support the rupee. India's foreign exchange reserves rose to an all-time high of $709.41 billion in the week ended Jan. 23, primarily due to an increase in the value of gold holdings and dollar-rupee buy-sell swaps undertaken by the central bank to boost liquidity. 

 

Of the 17 poll respondents, only six expect the Indian unit to decline past the psychologically-crucial 92 mark this month. In fact, the Indian currency may settle at 91.25 a dollar by the end of the current financial year ending March, according to the median of estimates of 13 respondents.

 

However, a large net short outstanding dollar-rupee forward book may constrain the central bank's capacity to intervene through dollar sales in the currency market, some poll respondents said. The RBI's net outstanding sales of dollar-rupee forward contracts were at $62.35 billion at the end of December. 

 

A prolonged delay in clinching a trade deal with the US is expected to remain the biggest pain point for the Indian currency, market participants said. In August, the US imposed steep 50% tariffs on Indian goods. Since then, both the countries have been negotiating a trade deal, with India particularly looking at lower US tariffs on Indian goods while the US is seeking greater access to the Indian market.

 

The Economic Survey for 2025-26 (Apr-Mar), tabled in Parliament last week, said India and the US are expected to conclude the ongoing negotiations for the bilateral trade agreement during the year. However, the Survey did not specify whether "during the year" meant FY26, 2026, or FY27.  

 

Persistent strong foreign portfolio outflows may also continue to exert downward pressure on the local currency, market participants said. In January, FPIs pulled out almost $3.5 billion from domestic equities.

 

"The only respite for rupee now will be from the trade deal (with the US) coming through or if the situation changes with respect to flows," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said. "There were only small bits and pieces from the Budget which were flow supportive, but they will not immediately translate." 

 

With the seemingly unending wait for the US trade deal and no sign of FPIs returning to India, it appears that the RBI will remain the dominant market player in the currency market this month as well.

 

POLL DETAILS

 

Participant	Feb-end	Mar-end
CR Forex	92.50	91.80
Finrex Treasury Advisors LLP	92.50	93.00
Globe Capital Market	90.10-92.50	89.00-92.30
HDFC Bank	90.50-92.50	90.50-92.50
HDFC Securities	91.40	91.80
ICBC India	91.25-91.75	-
ICICI Bank	91.50	91.00
IDFC FIRST Bank	91.00-92.00	91.00-92.00
Karur Vysya Bank	90.80-91.00	-
Kotak Mahindra Bank	92.50	-
LKP Securities	90.75-91.00	90.00-91.00
Mecklai Financial Services	91.75-92.00	91.50
Nuvama Wealth Management	91.80	90.90
Shinhan Bank India	90.60-92.30	90.50-92.00
South Indian Bank	92.00	-
Tamilnad Mercantile Bank	91.00	90.00-91.00
UCO Bank	91.20	89.60
Median	91.50	91.25

 

 

End

 

US$1 = INR 91.51

 

Edited by Akul Nishant Akhoury

 

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