Rupee Set for Strong Rebound in Late 2026: SBI Report
SBI report predicts strong rupee recovery in second half of next fiscal amid geopolitical pressures.
The Indian rupee is expected to stage a strong recovery in the second half of the next financial year after facing intense depreciation pressures, according to a report released by SBI Research on Wednesday. The report attributes the recent weakness in the currency primarily to heightened geopolitical uncertainties, particularly delays surrounding the India–US trade deal.
Despite global headwinds, India’s trade data reflects notable resilience amid rising protectionism, labour supply disruptions and prolonged uncertainty. SBI’s Group Chief Economic Advisor, Dr Soumya Kanti Ghosh, noted that although the geopolitical risk index has moderated since April 2025, it remains significantly above its long-term average, continuing to exert pressure on the rupee.
Dr Ghosh added that empirical analysis suggests the rupee is currently in a depreciating phase but is likely to exit this regime soon. The currency recently breached the psychologically important 90-per-dollar mark and crossed 91 against the US dollar, marking one of its sharpest declines in recent years.
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However, signs of recovery have already emerged. On Wednesday, the rupee rebounded sharply, trading as strong as 90.25 during the day, supported by cooling crude oil prices and improved market sentiment. SBI noted that the current fall represents the fastest decline of the rupee scaled to 5 per dollar, with the currency sliding from 85 to 90 within less than a year.
The report highlighted that the depreciation has been largely driven by foreign portfolio investor (FPI) outflows, particularly from equities, after two years of strong inflows. Uncertainty over the US–India trade agreement has further weighed on investor confidence and capital flows.
Since April 2, 2025, following the US announcement of sweeping tariff hikes, the rupee has depreciated by 5.7 per cent against the dollar — the most among major global currencies. While the rupee remains the most depreciated, SBI noted it is not the most volatile, pointing to the 50 per cent tariff imposed on India as a key factor behind the current phase of weakness.
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