The latest slide extends a year-long weakening trend. The rupee has depreciated 5.16% in 2025, slipping from 85.70 on January 1 to 90.05 today. Analysts attribute the fall to global risk aversion, widening outflows from domestic markets, and persistent strength in the dollar index.
The depreciation is expected to make imports costlier, affecting sectors dependent on foreign supplies, including electronics, crude oil, and industrial components. The impact will also be felt by students and travellers abroad, as education fees, accommodation, and international travel become significantly more expensive.
Market participants said the currency’s decline was mirrored in equity markets. On December 2, the Sensex fell 503 points to close at 85,138, while the Nifty slipped 143 points to settle at 26,032, reflecting cautious investor sentiment amid heightened valuations and ongoing global uncertainties.
Analysts noted that heavy foreign portfolio investment (FPI) selling has intensified pressure on the rupee. “Outflows due to profit-booking at elevated market levels, along with increased demand for dollars driven by gold and crude purchases, have accelerated the decline,” said a market strategist. They added that while the short-term outlook remains weak, progress in upcoming trade negotiations could offer some relief.
The rupee’s movement is governed by the floating exchange rate system, where currency values fluctuate based on foreign exchange reserves and market forces. A drop in India’s dollar reserves typically weakens the rupee, while higher reserves help strengthen it.
With global uncertainties persisting and the dollar maintaining an upper hand, currency markets are expected to remain volatile in the near term.
.jpg)
.jpg)
