MUMBAI: The Indian rupee depreciated to a one-month low of 91.23 against the US dollar on Monday, weighed down by sustained capital outflows from equities and strong month-end dollar demand from importers [citation:1][citation:2]. The currency breached the 91 mark for the first time since January 18, 2026, extending its February decline to nearly 1.5%.
USD/INR Spot
The rupee opened at 90.95 and immediately came under pressure as foreign portfolio investors (FPIs) pulled out another ₹5,600 crore from domestic equities in early trade [citation:3]. Public sector banks were spotted bidding for dollars on behalf of oil marketing companies, exacerbating the fall [citation:5].
Capital outflows surge
According to NSDL data, foreign investors have sold a net ₹32,400 crore ($3.55 billion) in Indian equities so far in February, on top of ₹25,700 crore in January [citation:4]. The relentless selling — driven by rising US Treasury yields and a stronger dollar index (DXY at 107.40) — has made the rupee the worst-performing Asian currency this month [citation:2][citation:6].
Adding to the pressure, foreign banks were seen covering proprietary positions, while importers rushed to hedge near-term payables amid fears of further depreciation [citation:5].
RBI's defence
The Reserve Bank of India (RBI) is estimated to have sold roughly $1.5-$2 billion via state-run banks over the past two sessions to curb volatility [citation:3][citation:8]. However, dealers said the intervention was "opportunistic" rather than aggressive, with the central bank possibly wanting to conserve firepower or let the rupee find a new equilibrium. Forward premiums inched lower on speculation that the RBI may allow gradual depreciation to support exports [citation:7].
- Capital outflows: FIIs sold ₹32,400 Cr in equities during Feb (NSDL) [citation:4]
- Dollar demand: Oil marketing companies, importers cover positions [citation:5]
- Dollar strength: DXY at 107.40, 10Y Treasury yield near 4.6% [citation:2]
- Hawkish Fed: Markets push rate cut expectations to late 2026 [citation:6]
- Technical break: 91 breached, next support 91.50 [citation:8]
- Portfolio rebalancing: MSCI index changes trigger outflows [citation:3]
Macro impact: Winners and losers
Importers bleed, IT exporters gain
A weaker rupee is a double-edged sword. Oil marketing companies (OMCs) such as IOC, BPCL, and HPCL face higher import bills, potentially squeezing margins if global crude prices remain elevated [citation:5]. However, IT services firms (TCS, Infosys, HCL) and pharma exporters stand to benefit from better realisations when converting dollar revenues [citation:7].
Inflation concerns
Every 1% depreciation in the rupee adds roughly 10-15 basis points to core inflation, according to RBI estimates. With CPI already hovering around 5.2%, a sustained slide could complicate the MPC's stance [citation:6]. Bond yields edged up 4 basis points to 7.02% on Monday as traders priced in prolonged tighter monetary conditions [citation:8].
Reserves dip
India's forex reserves have declined by $9 billion over the last three weeks to $612 billion as of February 7, reflecting valuation losses and sporadic intervention [citation:3]. While still comfortable, the pace of erosion is being monitored.
Asian currencies performance (February 2026)
| Currency | Change vs USD (%) | Level |
|---|---|---|
| Indian Rupee (INR) | -1.48% | 91.23 |
| Indonesian Rupiah (IDR) | -1.12% | 16,350 |
| South Korean Won (KRW) | -1.05% | 1,398 |
| Thai Baht (THB) | -0.85% | 36.10 |
| Malaysian Ringgit (MYR) | -0.62% | 4.72 |
| Philippine Peso (PHP) | -0.30% | 57.80 |
Market reaction & forward view
The offshore non-deliverable forwards (NDF) indicate one-month dollar/rupee at 91.45, suggesting markets expect continued pressure. Options markets are pricing in higher volatility, with one-month implied volatility climbing to 5.8% [citation:7].
Key takeaways for investors & businesses
- Exporters (IT, pharma, textiles): Benefit from better realisations; consider hedging portion of future receivables at current levels.
- Importers (oil, electronics, capital goods): Margin pressure likely; accelerate hedging to avoid further downside risk.
- Equity investors: Sectors with high import content (auto, consumer durables) may see earnings headwinds.
- NRIs: Remittance rates become attractive; potential to lock in near 91.50.
- Inflation watch: Imported inflation could delay RBI rate cuts; bond yields may stay elevated.
- Technical levels: 91.50 next resistance; if broken, 92.00-92.50 opens up [citation:8].
Outlook and key levels
Most analysts expect the rupee to remain under pressure in the near term, with the dollar index strong and FII outflows likely to continue amid global uncertainty. The RBI's tolerance level is being tested — if outflows persist, 91.50 could be the next stop before authorities step in more aggressively [citation:2][citation:8].
For the remainder of the week, traders will watch US Fed minutes and any commentary from RBI Governor. Support for USD/INR is now at 90.80 (previous resistance turned support), while resistance is pegged at 91.50 and 92.00 [citation:8]. Importers are advised to cover near-term exposures, while exporters may adopt a 'wait and watch' for better rates above 91.50.
Disclaimer: The analysis and views are for information only. Please consult your advisor before taking forex or investment decisions.