Rupee Under Pressure in Samvat 2082 as Yields Harden Amid Global Volatility

The Indian rupee depreciated by 6.37 per cent against the dollar during Samvat 2082, ending the period weaker at 93.91 per dollar on November 6 after starting at 87.9325. This depreciation was driven by global uncertainties, significant foreign portfolio investor (FPI) outflows, and a widening trade deficit. The domestic currency had previously fallen 4.4 per cent against the dollar in the preceding Samvat.

Multiple factors contributed to the rupee's sustained pressure, including the imposition of US reciprocal tariffs on Indian goods, ongoing uncertainty over trade negotiations, and a strengthening dollar. Geopolitical tensions in West Asia, which escalated since late February, further weakened the rupee by raising concerns over India's import bill and current account deficit due to higher crude oil prices. The rupee touched an an all-time low of 96.96 per dollar in May 2026 amid these conditions, coupled with weak capital flows.

Madan Sabnavis, chief economist at Bank of Baroda, noted that Samvat 2082 was volatile for markets, with global disturbances heavily influencing stocks, currency, and bonds. He highlighted that Indian markets experienced more FPI outflows than inflows, leading to investors preferring other countries. VRC Reddy, head of treasury at Karur Vysya Bank, also described the outgoing Samvat as challenging, citing geopolitical tensions, elevated crude prices, global yield pressures, and FPI outflows.

To manage excessive volatility in the foreign exchange market, the Reserve Bank of India (RBI) intervened. In June, the central bank introduced a special dollar-rupee swap facility designed to attract fresh Foreign Currency Non-Resident (Bank) deposits and bolster the domestic currency. This intervention, along with other factors, saw the rupee recover towards the end of Samvat 2082, closing at its strongest level since April 22.

Concurrently, the government bond market witnessed a rise in yields. The benchmark 10-year government bond yield increased by 69 basis points, reaching 7.19 per cent on November 6 from 6.50 per cent at the beginning of the period. Yields peaked at 7.50 per cent during the Samvat. This hardening was influenced by global bond movements, domestic inflation concerns, and expectations of tighter monetary policy, alongside movements in US Treasury yields and actions by both the RBI and the US Federal Reserve.

Expectations of higher global interest rates, continued foreign investor outflows, and worries over government borrowing added to the pressure on bond yields. While initial RBI rate cuts and liquidity infusions offered some support to the debt market, concerns over inflation and rising crude prices limited these gains. The conflict in West Asia exacerbated imported inflation concerns later in the year. In October, the RBI raised the policy repo rate by 25 basis points to 5.50 per cent, adopting a calibrated tightening stance. Following this, the 10-year yield touched 7.48 per cent on October 26 before easing to 7.19 per cent by November 6, helped by softer crude oil prices and declining global yields.

What to watch: Continued global economic shifts and RBI's monetary policy decisions will influence market stability.

Editor's note: Comprehensive coverage of the source material, including specific figures and expert commentary.