Options traders' bearish bets on rupee jump 200% on surprise GDP slowdown

By Subhadip Sircar

 

Options traders have increased bearish wagers on the Indian rupee after data showed a sharp slowdown in the nation’s economic growth, heaping further pressure on the currency that’s hit a series of record lows in recent days. 

 

Data from the Depository Trust and Clearing Corp. show the volume of dollar-rupee calls trading climbed to $1.9 billion on Monday in the non-deliverable options market, up from about $600 million Friday. 

 

“This represents a significant jump in rupee bearish bets, particularly given that the bulk of the strikes were above the current spot,” said Akshay Chinchalkar, head of research at Axis Securities Ltd.  

The rupee, which hit a new low of 84.7625 per dollar Tuesday, is likely to weaken toward 86 by the final quarter of 2025, as less favorable economic growth crimps foreign inflows, according to Michael Wan, senior currency analyst at MUFG Bank.

 

The spike in bearish bets has been accompanied by an increase in the rupee’s one-month implied volatility versus the dollar. This measure rose to 3.27 per cent on Tuesday, the highest since Aug. 6. It was at 2.55 per cent on Friday. 

 

The volatility has upended the stability that has been the defining feature of the local currency market in recent months. The rupee has been one of the least volatile currencies among the emerging markets in 2024, mainly due to the central bank’s intervention strategy. 

 

The fresh phase of rupee weakness comes ahead of the Reserve Bank of India’s policy meeting on Friday, with the sharp growth slowdown stoking speculation of the authority announcing liquidity-easing measures.