Infosys, TCS, Wipro and other IT stocks rise up to 2% after the rupee fell to a new low. What drives this movement?

IT stocks such as Infosys, TCS and Wipro rose up to 2% on Wednesday after the sharp fall in the rupee past the Rs 90 per dollar mark spurred renewed buying in high-export technology names. The currency’s fall to an unprecedented 90.13 against the US dollar, its weakest level ever, pushed investors towards dollar income earners, lifting the Nifty IT index to the top of the sectoral charts.The Nifty IT index rose about 1% to 37,885, with Wipro leading the way. The stock rose over 2% to Rs 255.54 in late morning trade. TCS also advanced almost 2%, while Infosys, Mphasis and Tech Mahindra gained around 1% each. LTI Mindtree, Coforge and HCLTech also traded in the green with marginal gains.

The rupee breaks the psychological barrier

The rupee’s decline past the critical threshold of 90 per dollar marked the fifth straight day of depreciation, driven by weak capital flows, persistent demand from importers and continued uncertainty surrounding a US-India trade deal. The currency touched 90.13 on Wednesday, surpassing Tuesday’s record low of 89.9475, despite what traders described as regular RBI intervention.A currency trader at a private bank told Reuters that the breach of 88.80 – a level the RBI had defended for weeks – had “taken away” an important psychological and technical anchor. With that bottom gone, the rupee is more vulnerable to underlying pressures, including soft capital flows, strong importer demand and increasing speculative positioning.

Anindya Banerjee, Head of Commodity and Currency at Kotak Securities, said the rise in USD/INR towards 90 is fueled by continued short covering by speculators and continued demand from importers. The 90 level, he noted, is a major psychological barrier reinforced by a cluster of buy stop orders. “This is precisely why the RBI needs to remain active below 90; if the pair starts to sustain above this zone, the market could quickly shift to a higher trend phase towards 91.00 or even higher,” he added.

Banerjee also pointed to FPI outflows from equities, early signs of a carry trade in the yen easing, putting pressure on Asian currencies, and uncertainty surrounding the Indo-US trade deal as major drags on the rupee. A decisive daily close above 90, he warned, could encourage momentum traders and trigger new speculative inflows.

The dollar is weakening, but pressure on the rupee remains

The US dollar index fell to 99.22 in Asian trading as markets increasingly factored in expectations that Kevin Hassett could become the next chairman of the US Federal Reserve. However, the softer dollar offered little relief for the Indian currency.

Emkay Global said the rupee’s weakening trend is likely to continue, and expects the USD/INR to continue trading within the 88-91 range for the remainder of FY26. The broker noted that the rupee is “much weaker than its peers” this year – down 4.7% since the start of the year, while broader Asian currencies are up 2.4%. The currency has been disproportionately hit by the US 50% tariffs, with foreign portfolio flows remaining weak since the announcement and the RBI appearing to favor a lighter intervention strategy.

According to Emkay, the rupee’s trajectory will depend on the outcome of the US-India and US-RoW trade talks, Asia’s trade responses and the behavior of portfolio flows. In the absence of a trade deal, the brokerage expects continued pressure on the currency.

Investor anxiety is increasing

“A real concern now is the continued depreciation of the rupee and fears of further weakness as the RBI fails to intervene to support the currency. These concerns are forcing the FIIs to sell despite improving fundamentals of rising corporate profits and strong GDP growth,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Vijayakumar also said the currency’s decline could halt or even reverse once the India-US trade deal materializes, likely this month, although the extent of relief will depend on the outcome of the tariffs.

For now, analysts warn that with the rupee trading above 90, speculative momentum could take it towards 91 unless the RBI takes decisive action. Markets are watching the currency closely, and its rate will influence import costs, inflation and foreign portfolio flows in the coming months.

Meanwhile, IT stocks continue to benefit from the rupee’s decline, at least today.

Also read | Rupee falls above 90 per USD for the first time: What this means for D-St investors

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)