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Why Indian Rupee Falling? Explanation & Impact on Stock Market
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The Indian Rupee has recently hit new lows against the US Dollar, creating concerns among the citizens, traders, investors, and decision-makers of the country. On social media, many are attributing the drop to everything. Claims include conspiracy allegations against the government due to perceived global pressure.
However, what led to the sharp fall of the INR and what is its effect on the Indian stock market?
In this blog, you will know why INR is falling, the RBI intervention, FPI outflows leading to inflation, and the effect on the equity market and EMIs.
India’s Biggest Trade Shock: Why had the Rupee Fallen to 89.23?
This October, 2025’s India had experienced the biggest trade shock in recent years, directly affecting the INR.
Exports Fell Sharply
Just as the Chinese as we might have predicted, deliveries to the producing nation declined by 1.8% - i.e., the exports fell from 36.38 billion dollars to 34.38 billion dollars.
Imports Jumped 16.6%
The rush for gold due to the Modi government, along with the ever-increasing volumes of crude oil and coal. Likewise, consumers are more inclined to buy fancy appliances or phones.
Why did Indian exports decline? INR Depreciation Reasons
A. US tariffs
The US 5.5% import tariffs imposed on Indian commodities include imports from India from 50% for the same variety of spinach. As a consequence, there was an 8.5% decrease in exports related to the US, mainly into
The main blow was the following: chemicals, gems and jewellery, textiles, and engineering –79.5%.
B. Weak global demand
That is how Indian exporters were deprived of new orders due to the global slowdown.
Fewer exports = fewer dollars coming into India. Reduced demand for US exports also leads to this imbalance.
Why are imports rising rapidly?
A. Gold imports surged.
As a matter of fact, global gold prices went through the roof, and Indian gold demand would pay a lot.
B. The Expensive Gold Darkened The Future
Oil prices continued to rise as they reached $130 per barrel, becoming very expensive compared to the prices quoted for essential commodities. Now, more dollars are required to import crude oil since prices have increased. As crude prices rise, more dollars are needed for imports. A falling rupee and rising crude prices mean that imports have become more costly.
C. Imports of Food and Electronics Rise
We need USD to pay for these imports, which raises demand for dollars. The Rupee weakens when demand for USD increases.
FPI Outflow – Reasons for FPI Outflow
In the year 2025, India experienced significant FPI outflows. Whenever FPIs withdraw, they engage in the following activities. Firstly, they sell Indian stocks. Secondly, they convert Indian rupees to dollars. Lastly, they return the cash to the international markets, particularly in the US and Europe. The FPI outflows increase the demand for dollars, consequently causing the rupee to decline further.
Thus, FPI Outflow can be equated to:
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Stock market pressure.
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Rupee depreciation or Indian currency depreciation.
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Higher volatility.
Why Did the RBI Not Intervene Aggressively This Time Too? Reasons
Normally, when the rupee approaches 88.80 to 89.00, the Indian central bank RBI, has intervened strongly to ensure its value breaks through the 89.00 mark.
Why Did the RBI Intervene So Little?
India further requires protecting its foreign reserves; it has to maintain its forex reserves intact and protect them. For instance, Libya has been argued to withdraw foreign exchange reserves, which have been sold through the stabilisation fund. Heavy intervention, particularly in a volatile global environment, depletes the reserves and leads to a reduction in the country’s forex reserves.
Therefore, in the wake of an international financial crisis, governments consider strengthening their reserve position as their highest priority. This is the reason.
Imagine This: There Was No Conspiracy!
It was claimed that the so-called conspiracy is a baseless lie spread by social media and part of a defamatory propaganda campaign!
The Impact That a Falling INR Has on the People
The decline in the rupee has doubled the price of all imported items from various countries compared to what they were months ago. It will have the following implications for businesses in relation to these loans, which are assets, liabilities, or loans denominated in United States Dollars (USD).
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Higher EMI.
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Higher interest payments.
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Lower profitability.
And it can even influence movements within the stock exchange.
Rupee Fall Impact on Stock Market Performance
A falling rupee will create short-term pressures on the Nifty & Sensex.
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FPI outflows increase.
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Import-heavy sectors face margin pressure.
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Inflation rises → RBI may tighten policy.
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Higher fuel costs affect logistics & manufacturing.
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Consumption slows.
High & Low Nifty Levels
Resistance: 26,120 – 26,300
Support: 25,700 – 25,450
Bank Nifty Levels
Resistance:59,500
Support:58,500
The market might either break or make at these critical prices.
Are you searching for a problem that might drastically affect the Indian economy for a long time? Not at all! The fluctuation of the Indian Rupee is a short-term issue and not a long-term economic problem.
Long-term view remains strong due to:
1. Expansion of GDP.
2. Increase in manufacturing industrial production.
3. Rise of the digital economy.
4. A stable ruling government.
5. A robust banking system.
Short-term correction doesn’t mean long-term slowdown.
What Should Investors Do Now?
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Continue Your SIPs
Currency fluctuations do not change long-term wealth creation.
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Avoid Panic Selling
Short-term dips are naturally experienced.
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Use Corrections to Accumulate Quality Stocks
Strong fundamentals always win long term.
Conclusion
Last week, the USD to INR exchange rate dropped for the following reasons like a substantial earnings state, increased worldwide market uncertainties, heavily weighted USD, a large difference between export and import, increased USD availability for the importation of oil and gas, and an incursion of the FPIs for a short period.
Although share markets experience a short-term effect on the stock market as a result of the above, the devaluation of the rupee will set the stage for an inflationary trend.
DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.
Author
Frequently Asked Questions
The Indian Rupee is falling due to a widening trade deficit, high crude oil prices, rising gold imports, weak global demand, and US import tariffs. Additionally, large FPI outflows and a strong US Dollar have increased demand for USD, putting pressure on the INR.
When FPIs sell Indian equities and convert INR to USD, the demand for dollars rises. This causes the rupee to weaken and increases volatility in the stock market. FPI outflows also trigger selling pressure in Nifty, Sensex, and Bank Nifty.
RBI is intervening cautiously to preserve India’s forex reserves. Heavy intervention can rapidly deplete reserves in a volatile global environment. To avoid long-term vulnerability, RBI prefers limited action unless volatility becomes extreme.
A weaker rupee makes all imported items more expensive. This leads to higher fuel prices, costlier electronics, and increased EMIs for companies with USD loans. It also results in inflation, reducing purchasing power for consumers.
A falling rupee creates short-term market pressure. Import-heavy sectors like oil, aviation, manufacturing, and electronics face margin stress. FPI selling intensifies, inflation rises, and RBI may tighten policy, affecting Nifty and Bank Nifty levels in the near term.
