The Indian rupee continues its decent against the US dollar (USD), falling to the 95.87 mark. The falling rupee has caused substantial concerns amid other global macroeconomic uncertainties. Increased US Treasury yields, rising crude oil prices, and foreign fund outflows have played a significant hand at the rupee’s declining power. Moreover, the US-Iran conflict seems to have no end in sight, as President Trump rejected Iran’s ceasefire terms. Let’s discuss if the Indian stock market will crash if the rupee falls to the 100 mark against the greenback.
The rising price of crude oil, due to the ongoing US-Iran conflict, remains a major factor behind the rupee’s decline. India imports nearly 90% of its crude oil requirements, and has fallen victim to rising prices and a strong dollar.
Accordingto Pranay Aggarwal, Director and CEO, Stoxkart, “A move of the Indian rupee toward Rs. 100 per US dollar would significantly impact the economy and stock market.” Aggarwal highlights that a weaker rupee will increase import costs. Crude oil, electronics, and chemicals would see higher price levels, which would lead to inflationary pressure. Aggarwal further added, “Sectors dependent on imports, such as aviation, FMCG, and automobiles, may face margin pressure.“
However, not all is bad, according to Aggarwal. A weaker rupee also creates opportunities for Indian good in the international market. He states, “Indian exports become more competitive globally, benefiting pharma, textiles, and manufacturing exporters.” Companies that earn in US dollars could experience higher profits.
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According to Jigar Trivedi, Senior Research Analyst at IndusInd Securities, “In the extreme scenario of an escalating war between the US and Iran, if WTI oil hits $120 per barrel, the rupee could approach 100, putting the economy at risk.“
Source: Watcher Guru
