<p>For much of 2023 and 2024, the rupee gave the impression that it had found a secure spot. It hovered around Rs 83 to the dollar, shuffled a bit and then plopped right back. By 15 September 2026, the dollar cost Rs 95.79. That is a fall of roughly 15% in three years, most of it since late 2024. What changed? Several things actually and they did not have the politeness to take turns. A strong dollar and high American bond yields made US assets attractive. Foreign investors dumped Indian shares and took their dollars home. Then the Middle East pushed up oil prices. The foreign selling is consequential because it changed the flow of dollars. Overseas investors bought about USD 20.7 billion of Indian equities in 2023. They sold about USD 18.2 billion in 2025 and another USD 24.6 billion between January and August this year. Indian mutual funds helped support share prices, but their purchases could not replace the dollars leaving the country. A domestic buyer pays rupees to the seller. The foreign investor eventually wants dollars.</p><p>Oil provided the second drama. Brent averaged about USD 67 a barrel in January and USD 117 in April, before dropping to roughly USD 85 in June. Yet the rupee recovered only modestly when oil fell. That tells us the currency had a wider problem – foreign outflows and high US yields were still doing their work. By mid-September, Brent was back above USD 100. Could India have prevented the fall? It cannot decide the price of oil or the yield on American government bonds. It can, however, decide how welcoming India feels to investors. In July 2024, taxes on gains from listed shares rose. For long-term gains, the rate went from 10% to 12.5%; for short-term gains, from 15% to 20%. Foreign investors also face withholding taxes on dividends, though treaties can lower it. Capital gain taxes on equities still remain in place.</p><p>The tax changes did not send the rupee from 83 to 96. Their effect is much smaller than a large currency move. But when global investors become choosy, adding even a little to the cost of owning Indian shares is an odd way to compete for their money. Clearer rules and fewer irritations would help. The Reserve Bank of India, following a bit of hand wringing, has also used forward-market operations and schemes to attract foreign-currency deposits. Its reported foreign-exchange reserves reached about USD 786 billion in early September, a formidable sum. These measures can calm a defiant market and give businesses time to adjust. They cannot make expensive oil cheap or persuade an overseas fund to buy Indian shares. Some of the support also creates future obligations, so the headline reserve figure is only part of the story.</p><p>Where might the rupee go from here? Our central case is a gradual slide to around Rs 97 by September 2027 and Rs 103 by September 2029. That assumes oil settles nearer USD 80-90, American yields ease slowly and foreign equity flows stop being persistently downbeat. If oil falls further and investors return in force, the rupee could do better, reaching about Rs 97 in 2029 after some recovery along the way. Repeated oil shocks, stubbornly high US yields and continued foreign selling could instead take it towards Rs 117. These are scenarios, not binding scores in the currency forecast. The useful question is what would change the picture. Watch whether Brent stays below USD 80 for several months, whether the US ten-year yield moves sustainably below 4.25% and whether foreign investors begin buying Indian shares again for more than a fleeting week. And watch whether India makes its equity market easier to own.</p><p>A weaker rupee is unpleasant for importers, travellers and parents with kids studying overseas, but 96 does not by itself spell a currency crisis. Nor should anyone assume we are returning to 83. The sensible aim is to keep sudden moves manageable while making India attractive enough that investors want to bring their dollars back. The RBI can buy time; the rest of the job belongs elsewhere.</p>
<p>For much of 2023 and 2024, the rupee gave the impression that it had found a secure spot. It hovered around Rs 83 to the dollar, shuffled a bit and then plopped right back. By 15 September 2026, the dollar cost Rs 95.79. That is a fall of roughly 15% in three years, most of it since late 2024. What changed? Several things actually and they did not have the politeness to take turns. A strong dollar and high American bond yields made US assets attractive. Foreign investors dumped Indian shares and took their dollars home. Then the Middle East pushed up oil prices. The foreign selling is consequential because it changed the flow of dollars. Overseas investors bought about USD 20.7 billion of Indian equities in 2023. They sold about USD 18.2 billion in 2025 and another USD 24.6 billion between January and August this year. Indian mutual funds helped support share prices, but their purchases could not replace the dollars leaving the country. A domestic buyer pays rupees to the seller. The foreign investor eventually wants dollars.</p><p>Oil provided the second drama. Brent averaged about USD 67 a barrel in January and USD 117 in April, before dropping to roughly USD 85 in June. Yet the rupee recovered only modestly when oil fell. That tells us the currency had a wider problem – foreign outflows and high US yields were still doing their work. By mid-September, Brent was back above USD 100. Could India have prevented the fall? It cannot decide the price of oil or the yield on American government bonds. It can, however, decide how welcoming India feels to investors. In July 2024, taxes on gains from listed shares rose. For long-term gains, the rate went from 10% to 12.5%; for short-term gains, from 15% to 20%. Foreign investors also face withholding taxes on dividends, though treaties can lower it. Capital gain taxes on equities still remain in place.</p><p>The tax changes did not send the rupee from 83 to 96. Their effect is much smaller than a large currency move. But when global investors become choosy, adding even a little to the cost of owning Indian shares is an odd way to compete for their money. Clearer rules and fewer irritations would help. The Reserve Bank of India, following a bit of hand wringing, has also used forward-market operations and schemes to attract foreign-currency deposits. Its reported foreign-exchange reserves reached about USD 786 billion in early September, a formidable sum. These measures can calm a defiant market and give businesses time to adjust. They cannot make expensive oil cheap or persuade an overseas fund to buy Indian shares. Some of the support also creates future obligations, so the headline reserve figure is only part of the story.</p><p>Where might the rupee go from here? Our central case is a gradual slide to around Rs 97 by September 2027 and Rs 103 by September 2029. That assumes oil settles nearer USD 80-90, American yields ease slowly and foreign equity flows stop being persistently downbeat. If oil falls further and investors return in force, the rupee could do better, reaching about Rs 97 in 2029 after some recovery along the way. Repeated oil shocks, stubbornly high US yields and continued foreign selling could instead take it towards Rs 117. These are scenarios, not binding scores in the currency forecast. The useful question is what would change the picture. Watch whether Brent stays below USD 80 for several months, whether the US ten-year yield moves sustainably below 4.25% and whether foreign investors begin buying Indian shares again for more than a fleeting week. And watch whether India makes its equity market easier to own.</p><p>A weaker rupee is unpleasant for importers, travellers and parents with kids studying overseas, but 96 does not by itself spell a currency crisis. Nor should anyone assume we are returning to 83. The sensible aim is to keep sudden moves manageable while making India attractive enough that investors want to bring their dollars back. The RBI can buy time; the rest of the job belongs elsewhere.</p>
