Rupee Weakens 6.37% in Samvat 2082 as Bond Yields Climb

The Indian rupee experienced significant depreciation during Samvat 2082, losing 6.37 per cent of its value against the US dollar. This decline was driven by a combination of global economic uncertainties, persistent foreign portfolio investor (FPI) outflows, and an expanding trade deficit that put downward pressure on the domestic currency.

In comparison, the previous Samvat saw a 4.4 per cent depreciation of the rupee. Several factors contributed to the steeper decline this year, including the imposition of reciprocal tariffs by the United States on Indian exports and ongoing uncertainty surrounding trade negotiations. A stronger US dollar also played a crucial role, dampening investor confidence in emerging market currencies like the rupee.

Geopolitical tensions in West Asia, which escalated from late February onwards, further intensified the rupee’s vulnerability. Rising crude oil prices during this period heightened concerns about India’s import costs and the widening current account deficit. The domestic currency hit an unprecedented low of 96.96 against the dollar in May 2026, reflecting the combined impact of elevated crude prices, weak capital inflows, and dollar strength.

Madan Sabnavis, Chief Economist at Bank of Baroda, noted, "The past Samvat was marked by considerable volatility in the markets, mainly influenced by global disturbances affecting stocks, currency, and bonds. The high degree of interconnectedness in global markets was evident. Indian stocks generally declined as investors preferred markets in other countries, leading to net FPI outflows. The rupee faced sustained pressure due to these factors alongside a widening trade deficit and a stronger dollar."

To mitigate excessive currency fluctuations, the Reserve Bank of India (RBI) actively intervened in the foreign exchange markets. In June, it introduced a special dollar-rupee swap facility aimed at attracting fresh Foreign Currency Non-Resident (Bank) (FCNR(B)) deposits to provide additional support to the rupee.

By November 6, the rupee had strengthened somewhat, closing at 93.91 per dollar, the best level since April 22. Despite this, the currency remained substantially weaker compared to the start of the period, when it stood at 87.93 per dollar.

VRC Reddy, Head of Treasury at Karur Vysya Bank, commented on the challenging environment, saying, "The outgoing Samvat was difficult for Indian markets, shaped by geopolitical tensions, high crude prices, global yield pressures, and FPI outflows. Bond yields fluctuated, reaching a peak of 7.50 per cent, while the rupee’s depreciation pressure persisted, culminating in the all-time low of 96.96."

Alongside currency movements, the government bond market saw a rise in yields during the period. The benchmark 10-year government bond yield increased by 69 basis points, closing at 7.19 per cent on November 6, compared to 6.50 per cent at the beginning of the Samvat.

Bond yields were influenced by several external and domestic factors, including US Treasury yield trends, policy actions by the RBI and the US Federal Reserve, and liquidity conditions within India. Rising expectations for higher global interest rates, ongoing foreign investor outflows from Indian debt, and worries about government borrowing added upward pressure on yields.

Initially, RBI rate reductions and liquidity measures helped stabilize the debt market, but concerns over inflation and the impact of rising crude prices limited these gains. The conflict in West Asia later in the year added to fears of imported inflation.

In a key policy move, the RBI raised its policy repo rate by 25 basis points to 5.50 per cent in October, signaling a shift to a calibrated tightening stance. This pivot suggested a more cautious outlook on interest rates moving forward.

The 10-year bond yield briefly climbed to 7.48 per cent on October 26 before easing to 7.19 per cent by November 6. This easing was supported by a drop in crude oil prices and softer global bond yields, which helped improve market sentiment.

The developments in the rupee and bond markets during Samvat 2082 highlight the sensitivity of India’s financial system to global economic and geopolitical factors. As the country navigates these challenges, policymakers and investors remain alert to the evolving economic landscape both domestically and internationally.