The Indian rupee fell sharply by 0.3% on a day when markets should have been buoyed by the impressive 8.2% GDP growth. Instead, stocks, bonds, and the currency all declined, with the rupee’s midday slide triggering a reversal in the Nifty, which had opened at a record 26,300. Despite India’s strong quarterly GDP performance, the rupee has been among the weakest currencies in BRICS and ASEAN.
A key reason is that rapid GDP expansion has not been matched by corporate earnings. Nifty 50 EPS has grown only modestly for six straight quarters, making valuations appear stretched. Weak earnings have contributed to sustained foreign portfolio outflows—over $15 billion in FY25 and $16 billion so far in FY26—resulting in two consecutive years of balance-of-payments deficits. Foreign investors are also favouring markets with AI-driven opportunities, something India lacks.
Three recent setbacks intensified pressure on the rupee: the stalled US trade deal, a record $41 billion October trade deficit that forced economists to raise CAD forecasts to 1.2–1.4% of GDP, and concerns that discounted Russian crude may no longer be available. Additionally, muted nominal GDP growth has raised doubts about future earnings.
Still, several global firms now view Indian equities as attractively priced and the rupee as undervalued—suggesting a potential buying opportunity may be close.
