Rupee faces 6.5% annual depreciation path as forex mobilisation only delays pressure: Systematix

Systematix warns of continued rupee weakness as trade deficits, capital flows and structural economic factors weigh on the currency outlook

PGurus Newsdesk

August 30, 2026

The rupee faces renewed depreciation pressure as Systematix warns that stronger forex reserves may only delay deeper structural challenges

The brokerage said the rupee’s structural weaknesses remain unresolved despite the RBI’s efforts to rebuild its foreign-exchange reserves and support the currency

The Indian rupee could remain under sustained structural pressure despite the Reserve Bank of India’s efforts to strengthen its foreign-exchange reserves, with domestic brokerage Systematix estimating a new average annual depreciation path of around 6.5% for the currency.

In its latest India economy report, Systematix said the RBI’s foreign-currency mobilisation measures could provide near-term stability but have not addressed the underlying factors driving weakness in the rupee. The brokerage said that without aggressive central bank intervention, the currency could already have crossed the ₹100-per-dollar level.

Rupee has weakened 17% in two years

Systematix noted that the rupee has depreciated by around 17% over the past two years, falling from approximately ₹83 to nearly ₹97 against the US dollar despite substantial RBI intervention.

The brokerage said the central bank’s foreign-currency purchase and sale transactions during FY25 and FY26 amounted to nearly 98% of its foreign currency assets stock.

Systematix compared the current situation with the 2013 taper-tantrum episode, when a smaller foreign-currency mobilisation programme was followed by an appreciation of roughly 10% in the rupee.

According to the brokerage, the contrast indicates that foreign-currency mobilisation by itself may not be sufficient to deliver lasting exchange-rate stability.

Structural factors continue to weigh on rupee

Systematix said the rupee has significantly underperformed broad dollar and emerging-market currency indices since 2013, with the currency having depreciated by around 100% over the period.

The brokerage attributed the prolonged weakness to several structural factors, including productivity trends, capital flows, trade competitiveness, inflation and policy-related factors.

The report also highlighted concerns over India’s external trade position.

India’s trade deficit widened to around $86.6 billion-$86.8 billion in the first quarter of FY27, while the trade deficit with China reached a record level and was annualising at roughly $120 billion, according to the report.

Services exports also come under pressure

Systematix pointed to weakness in services exports as another concern for India’s external sector.

Services exports were estimated at around $49 billion in the first quarter, representing an 18% sequential decline, the brokerage said.

The report also noted that the rupee’s real effective exchange rate has fallen by approximately 17% since late 2024. However, this depreciation has not translated into a sufficiently strong improvement in exports, partly because Indian manufacturing continues to depend heavily on imported inputs.

$80 billion forex boost offers intervention cushion

The RBI’s recent foreign-currency mobilisation has nevertheless significantly strengthened India’s external buffer.

The central bank’s special forex measures attracted nearly $73 billion in inflows by August 21, with FCNR(B) deposits accounting for the bulk of the mobilisation.

India’s foreign exchange reserves subsequently reached a record $729.3 billion as of August 21, according to recent data, providing the RBI with greater capacity to intervene in the currency market.

Systematix estimated that the additional $80 billion in foreign-currency assets could raise India’s import cover to around 10 months and provide greater room for intervention.

However, the brokerage warned that the additional buffer could be rapidly depleted if global interest rates rise sharply or capital outflows intensify.

RBI measures may delay pressure rather than eliminate it

The rupee has recently benefited from a surge in dollar liquidity linked to the RBI’s special non-resident dollar deposit scheme. The currency ended August 28 at around ₹95.38 per US dollar, gaining 0.3% over the week.

However, Systematix argues that such measures primarily provide a window of stability rather than resolving the longer-term factors behind currency depreciation.

The brokerage expects the rupee’s depreciation path to remain elevated and volatile, with trade imbalances, external financing conditions and structural competitiveness continuing to influence the currency.

The assessment comes as the RBI balances the need to maintain orderly currency markets with the risks posed by higher oil prices, global interest rates and capital-flow volatility.

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