Rupee likely headed towards ₹91.50 amid capital outflows, rising CAD

NEW DELHI: The Indian rupee may slip to around ₹91.50 per US dollar in the next three months, market experts told Mint, pointing to bearish technicals, heavy capital outflows and a widening current account deficit. After breaching the 90-per-dollar mark on Wednesday, the rupee slipped further to an all-time low of 90.56 on Thursday before pulling back to close at 89.98. On the charts, the dollar-rupee (USD/INR) pair has given a strong weekly breakout above 89.84, opening room for a further rally, according to Ajay Suresh Kedia, founder and director of Kedia Advisory. He expects the rupee to weaken toward 91.50 over the next three months. “The pair has completed a large cup-and-handle formation, with price surging toward the 161.8% Fibonacci extension at 90.02, which has now been tested successfully. Sustained trading above 88.73 keeps the trend firmly positive,” he said. Kedia noted that the next upside for USD/INR stands at 91.50 near the 200% Fibonacci level, with key support at 89.64 and 87.63. A Fibonacci extension is a popular technical tool among traders which is used to project the price targets beyond a completed retracement move. Traders use this indicator to estimate the extent of the pullback or a breakout in the asset. A stronger move in the USD/INR pair would imply continued pressure on the rupee as global dollar demand remains elevated. Fundamental pressures Beyond the charts, traders say the currency is also grappling with persistent foreign selling and weak investment inflows. Foreign portfolio investors have offloaded shares worth ₹13,121 crore as of 4 December 2025, pushing 2025’s net outflows to ₹1,56,796 crore, according to NSDL data. While Kedia noted that India's Foreign direct investment inflows are at their lowest since 1990. “Reduced foreign investment weakens dollar supply and hurts currency stability,” said Kedia. At the same time, India’s current account deficit (CAD) reflects broader external pressures on the economy. According to economists, the CAD for FY26 could end up at 1.2% or 1.3% of GDP if the high US tariffs remain. That will be twice the quantum of deficit in FY25, which was 0.6% of GDP. The CAD for the first quarter of 2025-26 was $2.4 billion (0.2% of GDP) compared to $8.6 billion (0.9% of GDP) in the same period last fiscal year. The lower deficit was due to front-loading of exports to the US, higher net services receipts, and better remittances. “When interpreting rupee weakness, investors should recognise both that global dollar strength is a headwind, but also that India's trade deficit and capital flow dynamics are the core domestic challenge requiring attention,” said Nikunj Saraf, the CEO of Choice Wealth. India’s goods trade deficit surged to an all-time high in October, driven by rising gold imports and the impact of US tariffs. According to commerce ministry data, the trade gap widened to $41.68 billion, up from $32.15 billion in September and $26.2 billion a year earlier, far exceeding the $28.8 billion expected in a Reuters poll. Rupee outlook “The Indian rupee is trading at lowest level against the US dollar even though the economy grew strongly at 8.2% last quarter. In 2025, the rupee has fallen about 4–5% so far, making it one of the poorest-performing Asian currencies,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd. Kalantri said India's slow export growth, uncertainty about a trade deal with the US, and continued foreign investor outflows have all pushed demand for the dollar higher. “Escalating geopolitical tension and the sudden crash in crypto currencies have driven safe-haven flows into the dollar, weighing on the rupee. This week, INR is expected to remain volatile ahead of Reserve Bank of India (RBI) monetary policy, with USD/INR likely moving within the 89.10–90.85 range.” “In the near term, the rupee is likely to remain under pressure and could trade in the 89.50–91.20 range, especially if crude oil prices stay elevated and foreign investors remain risk-averse. A meaningful recovery will depend on a revival in foreign inflows, clarity on global rate-cut cycles, and improvement in India’s export momentum. Until then, the currency is expected to stay weak but orderly, guided by selective RBI intervention,” said Rahul Gupta, CBO, Ashika Group, a diversified financial services conglomerate. Over the last ten years, the rupee has weakened 26.96% against the US dollar, according to TradingView data compiled by Kedia Advisory. In comparison, the US dollar appreciated 37.11% in the same period. Kedia Advisory data also shows the dollar appreciated 46.74% against the rupee between 2005–2015 and 37.11% in 2015–2025. Despite volatility, the US Dollar Spot Index traded nearly flat at 98.822 on Thursday, up just 0.18% during the session. Read all Indian rupee-related stories here Read all stories by Anubhav Mukherjee Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.