The rupee, after slipping to a fresh all-time low of 95.23, recovered to close at 94.81 on Monday
The rupee, after slipping to a fresh all-time low of 95.23, recovered to close at 94.81 on Monday. While domestic markets remained shut on Tuesday, the offshore market indicates some recovery, possibly leading to a gap-up opening on Wednesday. Despite this rebound, the broader trend remains under pressure.
The immediate trigger for the recovery has been the RBI’s move to cap the Net Open Position (NOP-INR) of banks at $100 million, with compliance mandated by April 10. In effect, this restricts large dollar positions held by banks, curbing speculative activity. As banks begin to align with the new limits, they are likely to unwind dollar long positions, providing near-term support to the rupee.
However, this is not a structural fix. Geopolitical tensions involving Iran continue to keep risk sentiment fragile, supporting the dollar. At the same time, Brent crude futures remain elevated at around $107 per barrel, sustaining above the $100-mark. With the conflict showing signs of escalation, including the involvement of Yemen-based Houthis, oil prices are expected to stay firm, a negative for the rupee given India’s import dependence.
Foreign flows have also been unfavourable. March recorded net FPI outflows of $13.6 billion, a sharp reversal from February’s inflow of $4.2 billion.
Chart
On Monday, the rupee rallied sharply and marked an intraday high of 93.48. However the trend reversed immediately, leading to an all-time low of 95.23 before wrapping up the session at 94.81.
In case there is a recovery, as indicated by a rally on Tuesday in the offshore market, the rupee can rise to 93.80, a barrier. If this level is breached, it can move up to 93.40-93.20 in the near-term.
That said, the recovery can face challenges in the form of a rising dollar. The dollar index, which gained about 2.8 per cent in March, the biggest monthly gain since July last year, sustains well above 100.
But there is a chance for a corrective move, from the current level of 100.30 to 100. It could extend to 99.40-99.60. If this occurs, along with RBIs measure, the rupee can advance well into 93.40 level.
However, if the dollar index resumes the rally, the rupee might be stuck in a range since the positive measure by the RBI and the dollar strength is likely to counter balance in the near-term.
Outlook
Overall, the rupee is likely to trade within a narrow band with a mild positive bias in the near term. The key levels to watch are 93.20 and 94.50. While the RBI’s NOP cap may lend support through position unwinding, any sustained recovery will depend on whether the dollar index softens. Otherwise, gains could remain limited.
Published on March 31, 2026
