Rupee seen averaging 96/USD in FY27; RBI support may limit pressure: Motilal Oswal – Firstpost

The Indian rupee is expected to remain under pressure and average around 96 against the US dollar in FY27, with crude oil prices, dollar strength and geopolitical uncertainties emerging as key risks, according to a report by brokerage firm Motilal Oswal.

The report noted that the rupee saw sharp depreciation during April-May 2026, touching a low of 96.8/USD on May 20 amid higher crude prices, concerns over a widening trade deficit, and continued foreign portfolio investor (FPI) outflows.
However, the currency has recovered nearly 1.3 per cent from its lows and averaged around 94.7/USD in the first quarter of FY27 (April-June).

Motilal Oswal said that while elevated oil prices and a wider current account deficit (CAD) could keep the rupee on a gradual weakening trajectory, several factors may prevent a disorderly fall.

“Stronger capital inflows, a more favourable balance of payments outlook, sizeable foreign exchange reserves and continued intervention by the Reserve Bank of India (RBI) will likely prevent a disorderly depreciation,” the report said.

The brokerage added that the outlook for the rupee has improved following recent measures announced by the RBI and the government. However, risks remain from potential US dollar appreciation, interest rate hikes, geopolitical developments and fluctuations in crude oil prices.

India’s external sector remained resilient in FY26 despite pressure from the merchandise trade deficit. The current account deficit stood at $25.4 billion, only slightly higher than $23.1 billion (0.6 per cent of GDP) in FY25, keeping India among the better-positioned major emerging markets.

However, weaker capital flows impacted the overall balance of payments (BoP), which recorded a deficit of $23.6 billion in FY26, compared with a deficit of $5 billion in FY25.

Foreign direct investment (FDI), however, showed improvement, rising to $4.2 billion in Q4FY26 from $0.4 billion in Q4FY25 and an outflow of $3.7 billion in Q3FY26.
A current account surplus of $7.1 billion in Q4FY26, along with RBI’s dollar-rupee swap operations, helped the BoP record a surplus of $7.2 billion in the final quarter of FY26.

Motilal Oswal expects India’s services sector and remittances to provide support to the external position. Net services receipts are projected to rise to $245 billion in FY27 from $217 billion in FY26, while remittances are expected to remain strong at around $143 billion.

The brokerage said stronger invisibles and improving capital flows could provide a cushion to the rupee even as global volatility continues.