Mapping the fall: Rupee depreciation unlikely to trigger sustained selloff

Rupee depreciation is unlikely to bring the markets down, though it makes returns of foreign investors from Indian equities less attractive. 

The rupee declined by 3.1 per cent since September, and Indian equity benchmarks Nifty and Sensex fell by 8.5 and 7.3 per cent, respectively, during the same period. However, the markets need not tank every time the rupee depreciates sustainably over months. 

From January 2022 to October 2022, the rupee declined by 10.2 per cent, but Nifty and Sensex rose by 3.8 and 4.3 per cent, respectively. Similarly, from April 2018 to October 2018, the rupee declined by 12 per cent, but the Nifty and Sensex gained 2.7 and 4.5 per cent, respectively. A random sample taken over five instances when the rupee declined over months showed that a rupee depreciation need not necessarily lead to a market fall. The benchmark indices gained on two out of these five occasions.