The rupee breached the 94-per-dollar mark on Friday, succumbing to the pressure exerted by continued sales by foreign investors from the debt and stock markets, with the latter slumping by over 2% on the war in West Asia and elevated energy prices, which continued to weigh heavily on sentiment.
After a two-day rally on Tuesday and Wednesday and a break on Thursday on the occasion of Ram Navami, the benchmark Nifty and Sensex tumbled by 2.1% and 2.3%, respectively, on Friday. Both indices had opened around 1% lower, but edged lower throughout the session as investors grew jittery, indicating the shallow nature of the rebound earlier this week.
According to latest data, foreign portfolio investors (FPIs) have net sold Indian shares worth $12.3 billion so far in March – the biggest monthly figure ever. Overall, inclusive of the debt market, net FPI outflows this month total $13.3 billion. On Thursday, US investment bank Goldman Sachs downgraded Indian stocks to ‘marketweight’ from ‘overweight’ and cut its 12-month target for the Nifty to 25,900 from 29,300. The Nifty ended at 22,819.60 on Friday.
“We lower our earnings growth forecast materially for India, by 9pp (percentage points) cumulatively over the next 2 years, to 8%/13% for CY26/27 (vs 16%/14% prior to Iran conflict),” Goldman analysts said in a report dated Thursday. “We expect consensus estimates to be cut meaningfully over the next 2-3 quarters, in line with trends in prior oil-supply shocks, with the largest cuts in domestic cyclical pockets.” The American investment bank itself has slashed its GDP growth forecast for India for 2026 by 110 basis points to 5.9%, raised the inflation projection by 70 bps, and is predicting that the Reserve Bank of India (RBI) will have to increase the policy repo rate by 50 bps by the end of 2026.
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Experts have earmarked earnings growth to drive the market out of its current consolidation phase, and cuts across forecasted earnings, despite a push by the government through GST cuts and income tax rebates, could thus lead to further pain for the markets in the near-to-medium term.
Friday’s share market fall was broad-based, with all sectoral and broader market indices ending deep in the red. The Nifty VIX, indicative of the uncertainty in the market, surged nearly 9%. Other global markets also bore the brunt of the war, with US markets losing 2% on Thursday.
The same foreign outflows hurting stocks have been pulling the rupee to new record lows almost every day. On Friday, not only did the rupee fall past 94-per-dollar, but ended at 94.81 after having fallen as low as 94.85. On Wednesday, it closed at 93.98.
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The rupee has now fallen by 4% since the US and Israel attacked Iran in late February. The heavy FPI outflows have pulled the rupee down sharply, which has broken past the 92-, 93-, and now 94-per-dollar levels just this month. The Indian currency had weakened below 90- and 91-per-dollar back in December 2025, and is now precariously close to the 95-per-dollar mark.
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“As long as energy flows remain constrained, inventories continue to deplete, and oil and gas prices are likely to stay firm, (they will) keep pressure on the rupee. If crude remains elevated, we may see further reflexive weakness through speculative shorting, especially via the NDF (non-deliverable forward) market, along with importer panic buying and some hesitation from exporters,” said Anindya Bannerjee, head of commodity and currency research at Kotak Securities.
The NDF market is the offshore market where the rupee is traded via derivatives contracts. It is seen as a lead indicator of how the currency might behave during Indian market hours.
“That said, as we approach month-end and the financial year close, some exporter selling could emerge as dollar earnings are repatriated into India, which may provide temporary relief,” Bannerjee added.
