The Indian rupee plummeted to a record low of 91.99 against the US dollar in intraday trading on Friday, January 23, 2026. The rupee's decline of 41 paise reflects persistent foreign fund outflows and a volatile geopolitical landscape that has made investors cautious.

Factors Contributing to the Rupee's Weakness

• Foreign Portfolio Investor (FPI) Outflows: Foreign investors have been consistently selling Indian equities, creating significant pressure on the market. In January 2026 alone, FPIs have sold shares worth ₹36,591.01 crore. This trend of heavy selling began last year, with FPIs withdrawing ₹1.66 lakh crore in 2025.
• Equity Market Sell-Off: The domestic equity market mirrored the rupee's woes, with the Sensex falling 797.94 points to 81,509.43 and the Nifty declining 240.55 points to 25,049.35. The broader market also experienced selling pressure, with midcap and smallcap stocks seeing sharper losses.
• Global Uncertainty: Heightened global uncertainty, stemming from geopolitical tensions and potential trade wars, has increased risk aversion across markets. Concerns over US-India trade agreements and ongoing geopolitical uncertainties are also weighing on investor sentiment.
• Rupee Depreciation: The continued depreciation of the rupee against the US dollar has further diminished returns for FIIs. In 2025, the rupee dropped by 4.3%, reaching an all-time low of ₹91.01 in December.
• Trade Deficit: India's trade deficit, driven by increased imports and flat exports, has added to the pressure on the rupee.

RBI Intervention and Future Outlook

The Reserve Bank of India (RBI) has been intervening to smooth volatility in the forex market, but these interventions have not been able to reverse the overall negative trend for the rupee. Forex traders believe that a pending trade agreement with the US could act as a key stabilizing factor for the currency.

Experts suggest that the rupee is likely to remain vulnerable to external shocks until geopolitical risks subside and a trade deal materializes. MUFG Bank forecasts the USD/INR exchange rate to rise towards 92.00 by the third quarter of 2026.

Impact on Indian Economy

The continued FPI outflows and rupee depreciation pose challenges for the Indian economy. A weaker rupee can lead to increased imported inflation and potentially impact corporate earnings. However, domestic institutional investors (DIIs) have been providing crucial support by buying shares, partially offsetting the selling pressure from FPIs.