RBI Deputy Governor Poonam Gupta has provided a positive outlook for the Indian rupee, suggesting there is a fair case for the currency to not just stabilise but potentially appreciate from current levels, as reported by The Economic Times. Speaking at a State Bank of India event in Mumbai, Gupta stated that the cumulative depreciation of the Indian rupee over the past year and a half may be a temporary phenomenon, with the RBI's commitment to ensuring orderly foreign exchange market conditions and the ability to meet decades worth of current account deficit providing strong fundamentals. She emphasized that India's economy is positioned to grow at 7-8% in real terms and 11-12% in nominal terms for years and decades to come, with the CAD expected to shrink further and the capital account turning more favourable from later this financial year. The country's GDP growth soared to 7.8% in FY26 and is estimated to have maintained the same pace in the first quarter of FY27, demonstrating the resilience of India's economic fundamentals. Gupta noted that the rupee was not fully reflecting the strength of India's underlying economy, with the currency having depreciated 13.1% between March 31, 2025 and September 16, 2026, even as the economy maintains robust growth momentum.
RBI Deputy Governor Poonam Gupta highlighted that India has perhaps been among the most challenged emerging market economies over the past year and a half, facing each one of these shocks simultaneously and cumulatively, as reported by Business Standard. On trade, India faced among the highest tariff rates the US had imposed on any partner country and acute policy uncertainty. As a large net oil importer, it has been particularly exposed to oil supply disruptions and price shocks, with agriculture being a significant part of the economy sensitive to rainfall and El Niño risks this year. Unlike many other countries, AI has not yet been a boon for India. Despite these multiple challenges, the economy has emerged largely unscathed, with its strength manifested in India's growth being the highest among peers, inflation anchored, fiscal outcome on a consolidation path and a financial sector that is more resilient than ever. The Indian economy has done exceptionally well, advancing ahead on a resilient growth equilibrium of 7% plus that is spatially broad-based, sectorally diversified, and underpinned by rising productivity, Gupta noted.
Gupta highlighted that India's balance of payments position is improving significantly, with the current account deficit (CAD) expected to narrow in the coming years and the capital account could turn more favourable later this financial year, as reported by The Economic Times. For now, India has leveraged special capital flow measures implemented in June, resulting in a meaningful balance of payments surplus for the year. On capital account, Gupta pointed to stretched valuations in other markets, strong domestic macroeconomic fundamentals, robust GDP growth, a gathering domestic investment cycle and healthy bank and corporate balance sheets as factors that could support inflows. Measures to attract capital, rising foreign direct investment and the eventual inclusion of Indian bonds in more global indices could also strengthen capital flows into India. India's traditional strengths, including services exports and remittances, are expected to persist, while merchandise exports could benefit from new trade opportunities and recent free trade agreements, with lower dependence on imported oil also supporting the country's external position. However, higher oil and gold prices have temporarily widened the CAD, while the capital account surplus fell short of the deficit in recent years, resulting in a balance of payments deficit of $5 billion in 2024-25 and $23.6 billion in 2025-26.
The Indian rupee closed at ₹95.74 on Wednesday, showing some recovery from recent lows, as reported by The Economic Times. The rupee touched a record low of ₹96.96 in late May, after which measures by the RBI and government to attract inflows helped stabilise the currency. The Indian currency has depreciated 13.1% between March 31, 2025 and September 16, 2026, following recent market pressures. The rupee came under pressure after the West Asia war began in late February, falling over 4% against the dollar in March, but following several measures in the next few months, its depreciation has been contained to less than 1% between April and now, despite the rise in oil prices. The domestic unit saw an intraday low of ₹95.76 and ended the trading session at ₹95.74 against the American currency, showing some volatility in recent trading sessions. Asian currencies fell 0.1% to 0.3% as investors watched oil prices and Fed rate expectations, with the dollar index rising more than 1% since the Fed raised rates last week as bets on further tightening grew. On Thursday, the rupee is expected to open around 95.85-95.87 per dollar, down from its close at 95.74 in the previous session, as reported by The Hindu BusinessLine.
RBI Deputy Governor Poonam Gupta highlighted that there remains some disconnect between the real economy narrative and parts of the financial markets, attributable in good measure to the pull of short-term returns in competing markets, as reported by The Economic Times. She expects this disconnect to correct soon with easing geopolitical tensions, noting that no oil price shock has lasted forever and as relative valuations turn competitive again. Among the markets, she said that the bond market have performed well, both compared to its own past as well as in comparison to most other countries, while the equity markets, on the other hand, have not tracked the same optimism. According to Gupta, it is hard to predict how long the correction may take but the longer the disconnect continues, the higher the odds that the course correction is on its way. India grew 7.8% in FY26 and is estimated to have maintained the same pace in the first quarter of FY27, but equity markets have not reflected the same optimism, partly because investors have found more attractive AI-led opportunities in other economies. This has drawn capital and market attention away from India, creating a disconnect between the strength of the real economy and financial markets.
Brent crude, the global oil benchmark, was trading higher by 0.26% at USD 99.51 per barrel in futures trade, showing a slight recovery from lower levels, as reported by CNBC TV18. Oil prices, meanwhile, held below $100 per barrel, kept in check by improving Gulf crude supplies and growing hopes for a diplomatic resolution to the US-Israeli war with Iran, as reported by The Economic Times. Easing crude supply concerns offered early support to the rupee, with reports that the Strait of Hormuz could reopen soon, but the recovery in crude oil prices provided some relief to the rupee, though not sufficient to offset the dollar's strength. Brent oil prices reclaimed the $100 per barrel mark even as Iran said it remained open to diplomacy to end the US-Iran war, though the two countries remain far apart on ways to do so, as reported by The Hindu BusinessLine. Gupta highlighted that India's dependence on imported oil is set to decline through alternative sources of energy and the quest to find its own oil reserves, both of which will further bolster the trend reduction in oil demand as a percentage of GDP. For India, movements in crude oil prices are closely watched because the country imports a large share of its crude oil requirement. Higher oil prices can increase the country's import bill and demand for dollars, potentially putting pressure on the rupee, while a moderation in crude prices can reduce pressure on the import bill.
On the domestic equity market front, Sensex rose 299.17 points to settle at 74,828.25, while the Nifty closed 117.80 points higher at 23,446.80, according to CNBC TV18. Indian equity benchmarks rebounded strongly today, with the NSE Nifty 50 gaining 117.80 points (0.50%) to close at 23,446.80, and the BSE Sensex climbing 299.17 points (0.40%) to finish at 74,828.25. Positive domestic markets supported the rupee at lower levels despite the dollar's strength. Gupta emphasized that the Indian economy has done exceptionally well, advancing ahead on a resilient growth equilibrium of 7% plus that is spatially broad-based, sectorally diversified, and underpinned by rising productivity, while steadily working to break into a 8% plus equilibrium. "This is quite a feat for a large emerging market, and makes India stand out in its asset class," she said. We expect the rupee to trade with a positive bias as hopes of a diplomatic solution between the US and Iran amid indirect talks at the UNGA may improve global risk sentiment. Overall weakness in crude oil prices may also support the rupee," said Anuj Choudhary from Mirae Asset Sharekhan. However, a strong dollar and any fresh tensions between the US and Iran may cap sharp upside. The analyst expects USD-INR spot price to trade in a range of ₹95.50 to ₹95.95, with softer crude remaining the rupee's clearest support while a firm dollar after the Fed's hike and foreign portfolio outflows remain the main offsets. Foreign investors have net sold $3.5 billion of Indian stocks and bonds so far this month, as reported by The Hindu BusinessLine, highlighting continued pressure on the currency from capital outflows.
