SBI Report: According to research by the State Bank of India (SBI), the Indian rupee, which has been under pressure lately, is probably going to recover well in the second half of the next fiscal year, which runs from October 2026 to March 2027.

According to the research, while the rupee is now weakening, this trend is anticipated to eventually reverse. According to SBI’s research and historical patterns, the rupee is expected to break free from the current depreciation regime and strengthen in the second half of the next fiscal year.

It said “we believe that the Rupee is likely to bounce back strongly in the second half of next fiscal”

The research claims that significant foreign portfolio inflows had a major impact on past rupee swings. It said that the primary cause of rupee fluctuations prior to CY14 was the volume of portfolio inflows.

Such substantial inflows are no longer possible, however. According to the research, the most significant variables influencing the rupee at the moment are geopolitical concerns, particularly delays in trade agreements.

According to the research, global uncertainties have taken center stage, marking the end of the era of huge and cheap capital inflows. It said that net portfolio inflows averaged USD 162.8 billion from CY07 to CY14. In contrast, portfolio inflows have been much smaller at USD 87.7 billion between CY15 and CY25 (to date).

The research said that India’s trade statistics shows great resilience in spite of these difficulties. It pointed out that the nation has managed to cope with increased protectionism, labor supply shocks, and protracted global uncertainty without experiencing significant disruptions.

According to the research, there have been three major stages in the movement of the rupee throughout time.

The rupee fell much more than the USD during Phase I, which ran from January 2008 to May 2014. Weak internal fundamentals caused the rupee to fall by 16.3% on average over this time, while the dollar gained 1.7% on average.

During Phase II, which ran from May 2014 to March 2021, the rupee’s decline roughly corresponded with the rise of the dollar. There was a more coordinated movement between the two, with the rupee depreciating by an average of 7.9% and the dollar increasing by 5.1%.

Both the rupee and the USD have been declining concurrently throughout Phase III, which began in September 2024. According to SBI, this concurrent fall signals the start of a new era influenced by increased geopolitical unpredictability in the contemporary world.

Therefore, the paper said that although if the rupee is now in a falling regime, this phase is probably coming to an end. The rupee is anticipated to make a significant comeback in the second half of the next fiscal year after international worries subside.