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Rupee's Dramatic Slide: Why SBI Predicts a Strong 2025 Recovery

An SBI Research report pinpoints geopolitical uncertainties and delays in the US-India trade deal as major factors behind the rupee's recent depreciation. The currency has experienced its fastest decline, falling from 85 to over 90 against the US dollar in less than a year. Despite this sharp slide, the report indicates the rupee is not the most volatile currency and predicts it will exit this depreciating phase. A strong recovery is forecasted for the second half of the next fiscal year, supported by India's resilient trade data.

Key Points: SBI Report Forecasts Rupee Rebound in Second Half of 2025

  • Geopolitical uncertainty and US tariff hikes are key reasons for the rupee's 5.7% slide against the dollar
  • The rupee breached 91 per USD but recovered to 90.25 amid cooling crude oil prices
  • SBI notes the current fall is the quickest, sliding from 85 to 90 in under a year
  • FPI equity outflows after two years of strong inflows have significantly pressured the currency
2 min read

Indian rupee likely to bounce back strongly in 2nd half of next fiscal: SBI report

SBI Research says rupee's fall is driven by US-India trade deal delays and FPI outflows, but predicts a strong recovery in the latter half of the next fiscal year.

"the rupee is currently in a depreciating regime and is likely to exit it - Dr. Soumya Kanti Ghosh, SBI Group Chief Economic Advisor"

New Delhi, Dec 17

Geopolitical uncertainties driven by the delay in the India-US trade deal have been the single-most important reasons for the rupee sliding against the US dollar, an SBI Research report said on Wednesday, adding that the rupee is likely to bounce back strongly in the second half of the next fiscal.

India's trade data shows the remarkable resilience in navigating through prolonged uncertainty, more protectionism and labour supply shocks.

"While the geopolitical risk index has moderated since April 2025, the current average value of the index for April-October 2025 is much greater than its decadal average, which indicates how much pressure global uncertainties are exerting on INR," State Bank of India's (SBI) Group Chief Economic Advisor, Dr Soumya Kanti Ghosh, said.

Dr Ghosh further stated that consistent with their empirical analysis, "the rupee is currently in a depreciating regime and is likely to exit it".

After breaching the psychologically important mark of 90 per US dollar, the rupee crossed the 91-level on Tuesday.

However, the rupee staged a sharp recovery on Wednesday, trading as strong as 90.25 during the day, as the cooling of crude prices also contributed to improved sentiment.

According to the SBI report, the data also indicates that the current fall is the quickest (in terms of number of days) of the rupee, scaled to 5 per USD. In less than a year, the rupee has slid from 85 to 90 per dollar.

The current slide appears to be primarily driven by FPI outflows, chiefly equities (after two years of robust inflows) and uncertainty regarding the US-India trade deal.

Since April 2, 2025, when the US announced sweeping tariff hikes across economies, the Indian rupee (INR) has depreciated by 5.7 per cent against USD (most amongst the major economies), notwithstanding sporadic phases of appreciation owing to optimism over the US-India trade deal.

"While INR is the most depreciated currency, it is not the most volatile. This clearly indicates that the 50 per cent tariff imposed on India is one of the major factors behind the current phase of rupee depreciation," the SBI report noted.

- IANS

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Reader Comments

S
Sarah B
As someone who imports raw materials, the volatility is a nightmare for planning. Crossing 91 was a real shock. The prediction of a strong bounce back in the second half of next fiscal gives some hope, but we need more stability. The cooling crude prices are a good sign at least.
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Vikram M
The report says INR is the "most depreciated" but "not the most volatile". That's a key point! It shows underlying strength despite external pressures. Our fundamentals are solid. This temporary phase will pass. Jai Hind!
R
Rohit P
While I appreciate the analysis, these "bounce back" predictions from banks often feel like wishful thinking to calm the markets. From 85 to 90 in less than a year is serious. What concrete steps are being taken to reduce this dependency on FPI flows and US trade politics? We need less talk, more action.
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Priya S
The psychological mark of 90 is broken, but seeing it recover to 90.25 quickly is reassuring. It reflects the resilience mentioned in the article. For common people, a stronger rupee means cheaper petrol and electronics. Fingers crossed for the second half of next year! 🙏
D
David E
Interesting to see the data on this. The delay in the US-India trade deal seems to be the major blocker. Once that uncertainty is removed, we should see significant appreciation. The Indian economy has shown it can handle shocks better than most.

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