The Indian rupee has plunged to an unprecedented low of 95.33 against the US dollar, marking it as the worst-performing currency in Asian markets. This significant depreciation, which saw the rupee fall nearly 6% in 2026, surpasses the previous low of 95.21 recorded just a month prior.
Massive FII Outflows Fueling Decline
A primary driver behind the rupee's current volatility is the substantial outflow of funds by Foreign Institutional Investors (FIIs). Over March and April 2026, FIIs have divested more than Rs 1.9 lakh crore from Indian stocks and bonds. This figure is nearly double the Rs 1.12 lakh crore in outflows observed throughout all of 2025. In April alone, FIIs offloaded over Rs 64,185 crore worth of equities, increasing the demand for US dollars as they repatriate funds, thereby weakening the domestic currency.
Soaring Crude Oil Prices and Geopolitical Tensions
Simultaneously, a sharp rise in Brent crude oil prices has exerted immense pressure on the rupee. Prices recently hit a four-year high of $126 per barrel, fueled by escalating geopolitical tensions, particularly concerns over potential US military action against Iran and the stability of the Strait of Hormuz. India, importing approximately 80% of its crude oil, pays in US dollars. Higher oil prices translate into increased dollar demand from Indian importers, directly contributing to the rupee's weakening trend. Crude oil prices have consistently remained above $100 per barrel throughout the year, largely due to these geopolitical risks and supply worries.
Expert Outlook on Rupee's Trajectory
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, commented on the situation, stating, "The next important level we are watching is 96, and a sustained break above 96 opens the path to 97 — a level we see as achievable if Brent breaches $125 and the Hormuz situation deteriorates further." Banerjee also identified 94.80 as a significant support zone, noting strong dollar buying interest from importers between 94.50 and 94.80. He added that a move below 94.50 would necessitate a substantial fall in oil prices, implying a diplomatic breakthrough at Hormuz, which he does not consider the base case. "Until the Strait reopens, the rupee remains under structural pressure," he concluded.