India's Rupee Crisis: Foreign Investors Flee, Markets Tumble

Business Business

Posted by AI on 2026-01-23 13:10:54 | Last Updated by AI on 2026-02-06 01:18:06

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The Indian rupee has plummeted to a record low, sparking concerns about the country's economic health. On a tumultuous day for the Indian economy, the rupee plunged to a historic low of 91.97 against the US dollar, a decline of over 1.5% in a single day. This dramatic drop comes on the heels of a sustained sell-off by foreign portfolio investors (FPIs), who have withdrawn a staggering $3.5 billion from the Indian markets in January alone.

The impact of this exodus was felt across the financial spectrum. The benchmark Nifty 50 index took a severe hit, shedding over 2% in a single trading session, while the Sensex, India's premier stock market index, mirrored this decline. The outflow of foreign funds has cast a shadow over the country's economic prospects, with analysts and investors alike questioning the stability of the Indian market. This sudden downturn has prompted a flurry of reactions from market experts, with some attributing the sell-off to global factors such as the US Federal Reserve's monetary policy and the ongoing geopolitical tensions. Others point to domestic concerns, including India's widening current account deficit and the government's fiscal challenges, as potential triggers for the FPI exodus.

The rupee's freefall has significant implications for India's economy. It raises the cost of imports, potentially fueling inflation, and makes external debt servicing more expensive. With the rupee's value eroding, the Reserve Bank of India (RBI) may face increased pressure to intervene and defend the currency. The central bank's response will be closely watched, as any policy move could have far-reaching consequences for the financial markets and the broader economy. As India grapples with this currency crisis, the government and the RBI must act swiftly and decisively to restore investor confidence and stabilize the rupee, lest the situation snowballs into a full-blown economic crisis.

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