Rupee at 89: A Shift in Sector Dynamics, not a Market Crisis

On November 21, 2025, the rupee breached 89 against the U.S. dollar, and the Nifty 50 fell by half a per cent before the market closed. This decline in the equity index was closely linked to the currency movement. While I have witnessed sharper corrections and greater panic in the past, this episode felt familiar, like an old acquaintance who reappears every few years. We have lived through the Asian financial crisis, the 2008 global meltdown, the taper tantrum, demonetisation, and the Covid-19 shock. Each time the rupee weakens, the same questions arise: who benefits, who suffers, and what should a prudent investor do?[EasyDNNnews:PaidContentStart]

The answer is simpler than it appears amid all the noise. A weaker rupee essentially shifts profitability from importers to exporters. That is the core impact. Everything else, FII flows, current account deficit concerns, or RBI intervention, is secondary commentary.

Let us break this down into sectors and companies you may already hold or are considering for your portfolio. Your IT holdings have quietly received a boost. For every rupee that the currency depreciates, companies like TCS, Infosys, and HCL Technologies see their dollar revenues convert into more rupees, while their costs, mainly salaries paid in India, remain unchanged. A five-rupee fall from 84 to 89 translates to roughly 350 to 400 basis points of additional margin, provided they do not become aggressive with pricing. The same applies to the pharmaceutical sector. Sun Pharma, Dr Reddy’s Laboratories, Cipla, and others exporting generics or conducting contract research in the U.S. or Europe benefit every day the rupee remains weak.

On the other hand, the impact on import-dependent sectors is immediate and severe. Airlines face rising costs for fuel, aircraft leases, and maintenance contracts, all of which are denominated in dollars. Oil marketing companies and city gas distributors see crude oil becoming more expensive by the hour. Manufacturers assembling mobile phones, air-conditioners, or televisions in India are now dealing with component bills that have jumped by 6 to 7 per cent in a single quarter. Companies with unhedged dollar loans are recalculating their interest outflows, often wishing they had raised equity instead.

The market is already responding. Nifty IT has been outperforming the broader index by a couple of percentage points each week the rupee depreciates. This gap is likely to widen before it narrows.

However, many investors make the mistake of thinking they must sell all domestic stocks and buy only exporters. That strategy was obvious in 2013 and quickly became crowded. Today, the opportunity is subtler and more sustainable. Incrementally add to leading IT and pharma companies that already show consistent earnings growth. Retain your high-conviction private Banks and consumption stocks, but trim marginal holdings that rely solely on valuation expansion. Within import-heavy sectors, stick with those few companies that have genuine pricing power or natural hedges.

I often remind younger investors that currency trends can persist far longer than most anticipate. Quality businesses, however, have the potential to compound wealth for generations. Do not expect a sharp rupee rebound in 2026 or 2027. The more probable scenario is a gradual depreciation or an extended period of sideways movement within a wider band, such as 86 to 90. The RBI has stated clearly that it will manage volatility, not the exchange rate level. India’s structural import needs and the global dominance of the dollar will ensure a gentle downward bias for the rupee, lasting longer than headlines may suggest.

View this as a lasting shift in relative sector attractiveness, not a short-term trade. Gradually tilt your portfolio towards quality exporters, remain selective in import-heavy sectors, maintain diversification, and keep cash ready to deploy when fear overtakes the market. The Indian growth story remains robust; it is simply favouring companies that bring dollars into the country rather than those that send rupees out. The fundamentals have not changed, only the conditions. Approach this phase with patience and discipline, not with panic.

RAJESH V PADODE
Managing Director & Editor

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