Key Highlights:
- Exchange Rate Trends: The Rupee hovering near the 90.50–91.00 per USD mark.
- FII Inflows: Record foreign investment in the bond market following JP Morgan Index inclusion.
- RBI’s “Light Touch”: A policy shift from defending a fixed level to ensuring “orderly volatility.”
In early 2026, a curious trend has emerged: despite the Indian Rupee reaching historic lows against the Dollar, Foreign Institutional Investors (FIIs) are pumping record capital into Indian equities and sovereign bonds. Critics ask: Is this devaluation deliberate?
Official data from the Reserve Bank of India (RBI) suggests a strategic “crawling peg” approach. By allowing the Rupee to find its natural market value—influenced by the US Federal Reserve’s interest rate stance—the RBI is making Indian exports more competitive without burning through forex reserves.
FIIs are not deterred by the weaker Rupee because India’s Real GDP Growth remains the highest among G20 nations. The inclusion of Indian government bonds in global indices has created a “sticky” inflow of capital. The “boom” is a result of structural trust in the Indian economy’s long-term earnings, rather than short-term currency gains. The RBI’s stance in 2026 remains focused on “inflation targeting” while allowing the currency to act as a natural shock absorber.
