Indian rupee fresh record lows on flow pressure

The Indian rupee is projected to hit fresh record lows driven by deteriorating global risk conditions and persistent flow imbalances. Recently, the mismatch between dollar demand and supply has increased, notably due to NDF maturities and portfolio outflows. Strong importer hedging has been noted, while exporter selling remains subdued, contributing to the rupee's vulnerability to slight increases in dollar demand. Ongoing foreign outflows from Indian equity and debt markets overshadow the country’s structural positives. Without a return of positive portfolio flows or a shift in global risk sentiment, further declines in the rupee cannot be ruled out, suggesting the current weakness is orderly rather than panic-driven, indicating a critical watch for impacts.