Rupee poised for fresh weakness as foreign capital outflows intensify

The Indian rupee is likely to face continued selling pressure in coming months as foreign institutional investors maintain their exit from domestic markets, according to a broad consensus among currency strategists.

A survey of 37 market analysts conducted in early November projected the rupee would weaken to 96.00 per dollar by the end of January, from current levels near 94.70. The pessimistic outlook extends further, with strategists forecasting the currency could depreciate to 96.33 by the end of April, reflecting sustained capital outflows.

The projected decline underscores growing concerns about India's external account stability amid global monetary tightening and shifting investment flows. Foreign portfolio investors have been net sellers of Indian equities and debt instruments, reducing demand for rupees in foreign exchange markets and exerting downward pressure on the currency.

Analysts attribute the anticipated weakness partly to the divergence between Indian and global interest rates, with higher U.S. borrowing costs making dollar-denominated assets relatively more attractive to international investors. Unless domestic economic fundamentals strengthen or foreign fund flows reverse course, the rupee is expected to test lower levels in the quarters ahead.