The Indian rupee extended its losing streak on Monday, declining for the fourth consecutive session to close at 90.28 (provisional) against the US dollar, weighed down by geopolitical uncertainties and profit-booking in domestic equity markets after benchmark indices touched fresh all-time highs.

Currency Performance and Market Dynamics

At the interbank foreign exchange market, the rupee opened at 90.21 and touched an intra-day low of 90.50 during the session before ending 8 paise weaker compared to the previous closing level. This marks the fourth consecutive day of decline for the Indian currency, which has lost 53 paise since December 30 when it closed at 89.75 per dollar.

The currency's weakness reflects sustained pressure from dollar demand and geopolitical tensions, with the dollar index trading 0.24% higher at 98.39, reflecting safe-haven demand.

Equity Markets Witness Sharp Reversal

Domestic equity markets surrendered early gains to close lower despite touching fresh all-time highs during the session. The Sensex declined 322.39 points or 0.38% to close at 85,439.62, while the Nifty slipped 78.25 points or 0.30% to settle at 26,250.30. The Nifty opened strong at 26,333.70 and scaled a fresh all-time high of 26,373 during early trade but failed to sustain elevated levels as selling pressure intensified.

Sectoral Performance and Stock Movements

IT stocks emerged as the biggest laggards amid concerns over potential US tariff actions. The IT index shed over 1.50%, becoming the worst-performing sectoral index. Infosys declined 2.03% to ₹1,607.10, HCL Technologies fell 1.85% to ₹1,609.80, and Wipro dropped 1.71% to ₹264.40. HDFC Bank also weighed on sentiment, declining 1.87% to ₹982.90.

On the positive side, defence and realty stocks outperformed. Bharat Electronics surged 3.03% to ₹415.35, emerging as the top gainer on the Nifty. The Nifty Realty index surged 2.10% on strong business updates from multiple realty companies.

Geopolitical Concerns and Market Outlook

Market sentiment remained guarded as geopolitical tensions escalated following US military action in Venezuela. President Donald Trump's renewed remarks on potential tariff hikes against Indian imports linked to India's continued purchases of Russian oil added caution to global markets. Despite the overall weakness, falling crude oil prices provided some cushion, with Brent crude trading 0.36% lower at $60.53 per barrel.

Foreign institutional investors turned net buyers, picking up equities worth ₹289.80 crore, while India's forex reserves jumped by $3.29 billion to $696.61 billion in the week to December 26. Market breadth tilted towards declines, with 2,545 stocks falling against 1,723 advancing on the BSE. Volatility picked up during the session, with India VIX rising 6.06% to 10.02, reflecting increased market uncertainty amid global developments.

The Indian rupee experienced significant weakness on Friday, breaching the psychologically important ₹90 mark against the US dollar for the first time in recent sessions. The currency closed at ₹90.20 (provisional), marking a decline of 22 paise from its previous close of ₹89.98. This depreciation came amid a confluence of negative factors including disappointing domestic macroeconomic data and strengthening of the American currency in overseas markets.

Trading Session Performance

During Friday's trading session, the rupee exhibited considerable volatility at the interbank foreign exchange market. The currency opened at ₹89.95 against the dollar and experienced significant pressure throughout the day.

Key Market Factors

Several factors contributed to the rupee's decline, with persistent foreign fund outflows and strong dollar demand from importers significantly impacting investor sentiment. Forex traders noted that the combination of disappointing macroeconomic data and strengthening of the greenback in overseas markets created additional pressure on the currency.

On the domestic macroeconomic front, India's manufacturing sector showed signs of weakening momentum. The seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) declined from 56.60 in November to 55.00 in December, representing the weakest improvement in manufacturing activity in two years. The decline was primarily driven by softer expansions in new orders, though the reading remained above the 50-mark threshold indicating continued expansion.

Market Dynamics and Offsetting Factors

Despite the negative pressures, certain factors provided some support to limit the rupee's decline. Weak crude oil prices offered relief, with Brent crude trading 0.58% lower at $60.52 per barrel in futures trade. Additionally, domestic equity markets demonstrated strong performance, providing a cushioning effect against further depreciation.

Central Bank Intervention

Market participants noted that the Reserve Bank of India reportedly intervened in the foreign exchange market by selling dollars through state-owned banks. This intervention helped prevent a more rapid pace of decline in the rupee's value. Forex traders indicated that any further intervention by the RBI may provide support to the currency at lower levels, suggesting continued monitoring of the situation by monetary authorities.

The combination of weak domestic data, foreign fund outflows, and global dollar strength created a challenging environment for the Indian rupee, leading to its breach of the ₹90 threshold against the US dollar.