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Informist, Friday, Jan. 2, 2026

 

By Pratiksha

 

NEW DELHI – After a volatile December, the rupee is expected to trade on a more placid note against the dollar in the first month of 2026, with the Reserve Bank of India's assistance. However, the depreciation bias for the Indian currency is likely to remain, given the uncertainty over the trade deal negotiations with the US.

 

The rupee may settle at 90.00 a dollar by the end of the month, broadly unchanged from the December-end level, according to the median of estimates of 12 respondents from banks and brokerage firms polled by Informist.

 

"Indian rupee may continue to move under pressure due to tariff-related trade disruptions and as weak foreign investment flows continue to weigh on the sentiment," said Gaurav Sharma, associate vice-president and head of research at Globe Capital Market Ltd. "Despite witnessing steady growth and moderate inflation domestically, dollar-rupee is unlikely to find a strong support until uncertainty around tariffs eases."

 

The US slapped 50% tariff on imports from India in August. Both sides have been negotiating a trade deal, with New Delhi looking at lower US tariffs on Indian goods and Washington, DC, seeking greater access to the Indian market. Commerce Minister Piyush Goyal had earlier said the two sides would conclude a deal by November. After the deadline passed, Chief Economic Adviser V. Anantha Nageswaran in December said India and the US are likely to secure a trade deal by March.

 

In December, the Indian currency was highly volatile, even hitting a lifetime low of 91.0775 a dollar. However, heavy-handed intervention by the RBI had led to the rupee appreciating over 1% on Dec. 19, logging its biggest single-day gain against the dollar in over three years. 

 

Most market participants said that even if the central bank allows some depreciation of the rupee in January, it may step in through aggressive intervention to drive away speculative bets, as has been the case in recent times. Of the 12 poll respondents, only one expects the Indian currency to test the psychologically-crucial 91-per-dollar mark this month.

 

"Sudden intervention can be seen if there is a sharp decline in the rupee," said Jateen Trivedi, vice-president and research analyst, commodity and currency, at LKP Securities Ltd. "With India facing trade-deal uncertainty and high import-driven outflows, allowing the rupee to adjust alongside global peers seems to be the preferred strategy."

 

However, some poll respondents pointed out that a sharp drawdown in foreign exchange reserves and 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. 

 

India's foreign exchange reserves were at $696.61 billion in the week ended Dec. 26, more than $8 billion lower than the all-time high touched in September 2024. Meanwhile, the RBI's net outstanding sales of forward dollars rose for the third consecutive month in November, hitting a seven-month high of $66.05 billion.

 

"RBI can't use its forward book to sterilise the intervention too much because the forward book was already large to begin with," said Gaura Sen Gupta, chief economist, IDFC FIRST Bank. "If they had the forward book, they would have been much more aggressive in intervening and defending the rupee. So, they are working within their limitations."

 

Market participants will keep a close watch on how foreign portfolio inflows shape up in the new year. In 2025, foreign portfolio investors withdrew $10.68 billion from the domestic market, on a net basis, the most in three years. FPIs pulled out a record $18.28 billion from the domestic stock market last year owing to concerns about stretched valuations, subdued earnings, geopolitics, and the hefty tariffs imposed by the US.

 

However, they expect the domestic currency to find comfort on account of the likely inclusion of Indian government bonds in Bloomberg's flagship Global Aggregate Index. The index provider had proposed in September to add Indian bonds to the index. This is likely to be confirmed by January. Market participants expect FPI inflows to add up to $25 billion in 2026.

 

Meanwhile, the seemingly unending wait for the trade deal has kept market participants on edge for far too long. For now, it appears that the sentiment will be carried into the new year, with the RBI being the dominant market player.

 

POLL DETAILS

 

Participant	Jan-end	Mar-end
ANZ Bank India	-	90.00
Finrex Treasury Advisors LLP	90.50	89.50
Globe Capital Market	89.30-90.65	89.00-91.80
HDFC Bank	89.50-90.50	89.00-90.00
HDFC Securities	88.50-90.50	88.50-91.30
ICICI Bank	90.00	-
IDFC FIRST Bank	89.50-90.00	89.50
LKP Securities	91.50-91.75	93.00
Mecklai Financial Services	90.25-90.50	-
Private-sector bank	90.00	-
Shinhan Bank India	89.20-90.80	88.80-91.20
South Indian Bank	89.80-90.25	-
Standard Chartered Bank (India)	-	89.50
Tamilnad Mercantile Bank	90.50	91.50
Median	90.00	89.95

 

End

 

US$1 = INR 90.20

 

Edited by Rajeev Pai

 

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