The Indian rupee depreciated by 9.88% against the US dollar in FY26, marking it as Asia's weakest currency amid record foreign investor outflows and surging oil prices. The Reserve Bank of India intervened to stabilize the currency, while domestic funds provided a record cushion against the exits. Equity indices like Nifty and Sensex recorded their worst fiscal performance since FY20.
Foreign institutional investors withdrew a record ₹1.6 lakh crore from Indian equities during FY26, the highest ever, driven by strong global demand for the US dollar and challenges from global events including the West Asia conflict. This exodus contributed to the rupee's sharp 9.88% slide, making it Asia's worst performer, ahead of the Japanese yen's decline. The Malaysian ringgit, by contrast, topped Asian currencies with gains, according to The Economic Times reports on FY26 data. Domestic institutional investors countered with record inflows of ₹8.5 lakh crore, offering support to markets battered by currency depreciation and elevated oil prices from the Iran-related tensions in West Asia. Indian equity benchmarks Nifty and Sensex ended the fiscal year with losses, their poorest showing since FY20. Analysts note that central bank measures provided only temporary relief, with market pricing indicating potential further rupee weakness. Elevated oil prices risk worsening India's inflation and current-account deficit. Looking to FY27, the outlook hinges on the West Asia conflict; a ceasefire could spur recovery in crude prices, the rupee, and equities, analysts suggest.
