Rupee Struggles Against Dollar Demand Despite Global Slowdown as FII Outflows Surge Amid Equity Rally
The Indian rupee registered a decline on Thursday, closing at 95.34 (provisional) against the US dollar after paring initial gains. The currency move was heavily impacted by robust dollar demand from corporate hedgers and importers, which counteracted the supportive effects of easing crude oil prices. Forex traders noted that while the rupee opened higher following less hawkish comments from Fed Chair Kevin Warsh and a fall in global oil benchmarks, it ultimately lost ground due to investor outflows.Foreign Exchange Market Dynamics
The rupee traded within the range of 94.90 and 95.40 during the session. It had closed at 95.16 on Wednesday, meaning Thursday's decline registered a loss of 18 paise. The currency faced continuous pressure amidst geopolitical uncertainty surrounding the US and Iran deal.While a decrease in global crude oil prices and potential RBI interventions provided some underlying support to the local unit, sustained foreign fund outflows suggest continued downward pressure. Globally, the dollar index was seen trading at 101.00, recording a drop of 0.38 per cent. Brent crude futures also eased by 1.43 per cent, settling at USD 70.55 per barrel.
Institutional Selling and Foreign Investor Flows
Foreign institutional investors continued their selling spree in the equities market. On Wednesday alone, institutions sold stocks worth Rs 1,140.50 crore on a net basis, according to exchange data. This activity is part of a broader trend where global risk aversion has led foreign investors to withdraw significant capital from Indian equities.The cumulative withdrawals by Foreign Portfolio Investors (FPIs) are particularly pronounced. Total FPI outflows have surged to Rs 2.7 lakh crore in 2026, significantly surpassing the Rs 1.66 lakh crore that was withdrawn during the entire calendar year of 2025. Furthermore, FPIs withdrew Rs 49,340 crore from Indian equities in June alone.
Domestic Equity Market Performance
In contrast to the currency instability and institutional selling, the domestic equity market saw strong gains. The Sensex demonstrated remarkable resilience, surging by 579.48 points to settle at 77,502.12. Meanwhile, Nifty experienced a surge of 169.85 points, reaching 24,175.70.Analyst Outlook and Market Projections
Analysts maintain a cautious outlook for the rupee moving forward. Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, noted that the currency is expected to trade with a negative bias due to the ongoing uncertainty surrounding the US-Iran deal. He added that any softening of the dollar resulting from dovish Fed commentary, alongside declining crude oil prices, could potentially support the rupee's lower levels. The USD-INR spot price was consequently projected to trade within the range of 95.00 to 95.60.Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
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