NEW DELHI: Despite blockbuster Q2FY26 GDP data fueling hopes of new highs and a roaring bull run, India’s benchmark indices -- BSE Sensex and NSE Nifty -- tumbled into the red for the third straight session on Wednesday as a sharp fall in rupee value has spooked sentiments.
Beating estimates by a significant margin, official data released on Friday showed that India’s economy grew at a six-quarter high of 8.2 percent in the July–September (Q2FY26) quarter compared with 7.8 percent in the previous quarter. Since the announcement, the benchmark indices have plummeted about 1 percent each while the rupee hit a record low of Rs 90.
The Sensex, after hitting a low of 84,763.64 in intraday deals, declined 31.46 points or 0.04 percent to settle at 85,106.81 on Wednesday. The Nifty 50 index fell 46.20 points or 0.18 percent to settle at 25,986. It hit an intraday low of 25,891 on Wednesday. Broader markets underperformed, with the Nifty Midcap100 declining 1 percent and the Smallcap100 falling 0.7 percent.
Sectorally, the tone was weak, with most indices ending in the red. Nifty PSU Bank slumped nearly 3 percent after the government clarified it has no plans to raise the foreign direct investment (FDI) limit in state-owned banks from 20 percent to 49 percent. The change in sentiment is primarily attributed to a fall in rupee’s value against the US dollar. Rupee slipped below the 90-mark for the first time on Wednesday, pressured by the absence of a confirmed India-US trade deal and repeated delays in timelines. Its impact on the market is such that Foreign Institutional Investors (FIIs) offloaded shares (net sales) worth Rs 7,666 crore so far this week.
So far in 2025, FII net sales stand at about Rs 152,044 crore, as per NSDL data. Ongoing trade uncertainty, mixed global cues and delay in India-US trade agreement are also said to be weighing on the sentiment. Ravi Singh, Chief Research Officer from Master Capital Services said that the rupee slipping to a record low against the dollar naturally injects a bit of nervousness into the equity markets, though the market’s response is usually more measured than a simple risk-off reaction.
“A weaker currency typically benefits export-oriented sectors such as IT, pharma, etc where dollar revenue translation lifts earnings. However, a weaker currency often makes foreign investors more cautious, as continued depreciation lower returns when funds are repatriated,” added Singh.
Rahul Gupta, CBO, Ashika Group said that USDINR breaching the Rs 90 mark is not a one-day event but the culmination of sustained capital outflows, persistent trade imbalances, trade deal, and a stronger global dollar. While the RBI has stepped in periodically to smooth volatility, the broader trend reflects a recalibration of India’s external sector under tighter global financial conditions.
In the near term, Gupta anticipate the rupee to remain under pressure and could trade in the 89.50–91.20 range, especially if crude oil prices stay elevated and foreign investors remain risk-averse. He added that a meaningful recovery will depend on a revival in foreign inflows, clarity on global rate-cut cycles, and improvement in India’s export momentum. Until then, the currency is expected to stay weak but orderly, guided by selective RBI intervention.
Going forward, investors will be keenly watching the RBI MPC outcome and the Federal Reserve monetary policy outcome. “Global markets were mixed as investors are assessing ahead the Fed & ECB monetary policy and currency volatility, while sentiment remained cautious after a jump in Japanese bond yields on expectations of BOJ tightening and increased government spending. The RBI’s policy decision this week will be crucial, especially for banks, as rate cut probability has reduced post the strong Q2 GDP data,” said Vinod Nair, Head of Research, Geojit Investments.