Devang Shah, head of fixed income at Axis Mutual Fund, told BT that if there is no immediate settlement in the Iran conflict, the rupee could touch 97-98.
India's rupee hit a fresh record low on Monday, closing at 96.35 against the US dollar.
The rupee has now fallen around 7 per cent in 2026, and has been among the worst-performing currencies in Asia.
This is despite the Reserve Bank of India periodically intervening to stabilise the rupee, and the government also announcing measures such as raising duty on gold to slow down imports.
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Typically, the rupee does depreciate around 4 per cent on average each year due to the country's persistent trade deficit.
As imports continue to exceed exports, there is always more demand for US dollars.
This year, the decline has been significantly faster due to two key reasons.
The conflict in West Asia sent oil prices soaring to over $100 a barrel.
Given India is dependent on imports for much of its oil requirements, the import bill has seen a significant increase, which means more demand for dollars and, in turn, pressure on the rupee.
Foreign Portfolio Investors (FPIs) have also been heavily selling in the Indian equity market, as they remain worried over taking fresh bets, amid the current geopolitical uncertainty, and the impact the crude oil price shock and supply chain disruptions will have on India.
Also, as artificial intelligence (AI) has gained traction, a lot of investor money has flown into markets like Taiwan, South Korea and the USA, chasing such AI-related investment opportunities.
India has missed out, given that it has hardly any listed companies in this space.
Importantly, at the same time, sentiments on India’s software services companies have turned bearish as worries rise on the kind of impact AI will have on their business models.
For markets and businesses, the practical impact depends on final numbers, regulatory filings, company disclosures and broader investor sentiment once the trading day or reporting cycle is complete.
For households, investors and policymakers, the final effect becomes clearer only when the headline is read with market closing data, regulator records, company statements and the wider macroeconomic setting.
