INR might breach the 93 to 95 level.

 

Don’t get surprised, but be ready. Since the current situation is a double-edged sword, India knows very well how to manage and play the dice.  But you are surprised why the RBI and the Ministry of Finance are sleeping well and why no actions when INR is crossing the 90 mark. The INR still has a long way to go, and it's unstoppable. Every action of the government and the RBI will fall short and will be short-lived. Infact the government is doing right. Let's dig how?

On one side, it’s a CAD, and other side, it's a capital account outflow impacting the INR.  In October 2025, India recorded a record trade deficit of $41.68 billion. Exports fell sharply by roughly 11.8–12%, dropping to about $34–35 billion, while imports surged due to an extraordinary spike in gold buying. Gold imports alone jumped nearly 200% year-on-year to about $14.7–15 billion, adding an extra $9.8–10 billion to the import bill in a single month. This has exerted pressure.

The capital account outflow cannot be controlled as of now, and all the blame cannot be passed to FII’s alone. The structural basis of the Indian capital market has changed dramatically, and India faces this situation for the 1st time.   The Dollar Index has indeed strengthened by about 10% against major global currencies in 2025, but the Indian Rupee has declined by only about 5–6% year-to-date. This divergence signals that the Rupee’s weakness is not merely a global dollar story — it is a reflection of India’s own economic story.

On the CAD part, India is well balanced. Last year, India’s CAD stood comfortably at around 0.6% of GDP. For FY25, it is now projected to widen sharply to about 1.4% of GDP. A widening CAD means the country needs substantially more foreign capital just to finance routine economic activity. More external funding requirements translate directly into persistent pressure on the domestic currency. But the real issue is the capital account outflow through the OFS route, which cannot be controlled.

While the trade account weakened, the capital account delivered another setback. In 2025 alone, Foreign Portfolio Investors (FPIs) withdrew between $16 billion and $ 21 billion from Indian equities. As a result, foreign ownership in Indian stocks has fallen to a 15-year low. This is beneficial since the market is more in the hands of DIIs and less volatile; however, the capital account outflow is the major factor, which will have a more significant impact on the INR. This is when existing shareholders — founders, private equity funds, or early investors — sell their shares to the public. This money does not go to the company. It goes straight into the sellers’ pockets.  India's IPO market has been robust in 2025, with over 96 companies raising approximately ₹1.6 lakh crore so far

Nearly 63% of all IPO money raised this year came through OFS.

Let’s look at real examples:

·        LG Electronics India raised ₹11,607 crore — 100% OFS. Not a single rupee went into the company. The entire issue was simply the Korean parent selling its stake to Indian retail investors.

·        WeWork India raised ₹3,000 crore — again, 100% OFS. A pure exit.

·        Tata Capital: ₹15,500 crore raised, with 55–70% via OFS

·        Lenskart: ₹7,200 crore raised, again with a heavy OFS component

The upcoming OFS will drag the INR to beyond 93 to 95 ( at the maximum level). This will create more pressure on the INR in the coming months.

 Further BFSI sector has been the leading (e.g., Canara HSBC Life's ₹2,518 Cr 100% OFS in Oct). Total PSUs divested ~₹10,000 Cr via OFS. The INR depreciation is a boon for many sectors in India that were impacted due to the tariff war of the U.S economy.  The U.S trade agreement will give some relief to the rupee.

Conclusion

Where the Rupee Could Go Next: Three Scenarios-

Three broad paths now define the outlook:

• Bear Case: No meaningful progress on US trade negotiations, persistently high oil prices, and weak exports could push the Rupee into the 91–93 range.
• Base Case: Partial tariff relief and stable crude prices could contain the Rupee within the 88–91 range.
• Bull Case: A constructive US–India trade deal, export revival, and a softer global Dollar could allow the Rupee to strengthen back toward 86–88.

For long-term investors, a weaker Rupee is not uniformly negative. It tends to support export-driven earnings, but it also demands greater discipline in evaluating foreign exchange sensitivity across portfolios.