Rupee weakness is being driven mainly by global volatility rather than domestic economic weakness, Finance Minister Nirmala Sitharaman said, as higher crude prices and geopolitical tensions continue to weigh on India’s external environment.
Brent crude is trading near $95 a barrel amid U.S.-Iran tensions, while the Iranian rial has fallen to a record low. These developments are adding pressure to India’s import-heavy economy.
Sitharaman highlighted domestic economic resilience, pointing to GDP growth above 7%, low inflation and a current account deficit below 1%. Market participants are also watching Fed Chair Kevin Warsh’s Jackson Hole keynote this week for indications on the U.S. interest-rate outlook.
HSBC warns of negative currency cycle
HSBC India CEO Hitendra Dave warned that persistent rupee depreciation could create a “self-fulfilling negative loop”, with foreign investors potentially pulling back and global capital moving towards U.S. and Asian alternatives.
Dave also flagged a mismatch between corporate earnings growth and equity valuations. HSBC had adopted an underweight stance on Indian equities in April 2026, citing energy dependence and currency volatility among the key risks.
Despite these concerns, HSBC India reported $965 million in pre-tax profit for the first half of 2026, up 3.65% year-on-year, while expanding its wealth banking services. Dave said lower global oil prices, progress on land and labour reforms and concrete announcements of large-scale foreign direct investment could help break the negative cycle.
Q1 FY27 GDP growth seen near 7%
The growth outlook remains relatively firm. CareEdge Ratings expects Q1 FY27 GDP growth at 7.3% and has raised its full-year FY27 projection to 7%, supported by manufacturing and construction activity.
RBI Deputy Governor Poonam Gupta has said growth could approach 7%, above the RBI’s 6.7% forecast, while describing 7.5% growth as a long-term “given.” Bank of Baroda Research expects Q1 growth between 7% and 7.2%, but identified higher crude oil prices and a delayed monsoon as key risks.
The official Q1 FY27 GDP data is scheduled for August 31, with several forecasters now expecting growth at or around 7%.
