The rupee hit a record low against the US dollar in May 2026. It fell 7.8% since January and over 13% from a year ago.
This fall creates two clear groups in the stock market. Exporters earn more. Importers pay more.
IT and pharma stocks gained. Oil companies and airlines bled. The RBI stepped in to slow the fall.
Here is the full breakdown.
The Rupee’s Fall: How Bad Is It?
The rupee started 2026 at 89.89 per dollar. By May 20, it touched 96.90.
A year ago, on May 20, 2025, the rupee stood at 85.50. That marks a 13.33% drop in just 12 months.
| Date | USD/INR Rate | Key Event |
|---|---|---|
| Jan 1, 2026 | 89.89 | Year opens |
| Feb 2, 2026 | 91.27 | West Asia conflict begins |
| Mar 2, 2026 | 91.59 | Oil prices climb |
| Apr 1, 2026 | 93.21 | FPI selling continues |
| May 1, 2026 | 94.89 | Brent crosses $100 |
| May 20, 2026 | 96.90 | Record low |
Three forces drove this fall. Foreign portfolio investors sold Indian stocks heavily. Crude oil prices surged past $100 per barrel. The US dollar stayed strong against most emerging market currencies.
India imports nearly 90% of its crude oil. So rising oil prices hit India harder than most countries.
Winners: IT Exporters
Indian IT companies earn most of their revenue in US dollars. A weaker rupee means every dollar converts into more rupees. Costs stay mostly in rupees. So margins expand.
The Nifty IT index jumped 7% in just three sessions in May 2026. It gained 3.2% on a single day.
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Analysts estimate a 150-200 basis point improvement in IT margins from the rupee’s fall.
For the top six IT firms, the rupee depreciation added 40 to 320 basis points to EBIT margins in Q4 FY26.
| IT Company | Margin Benefit (bps) |
|---|---|
| Tech Mahindra | Up to 320 |
| TCS | 60-75 |
| Infosys | 50-60 |
| HCLTech | 40-60 |
| Wipro | 40-50 |
| Smaller players (Zensar, Cyient) | 80-90 |
Every 1% rupee depreciation adds 20-30 basis points to IT operating margins.
The Nifty IT index had fallen 23% in 2026 before this rally. AI disruption fears had battered the sector. The rupee’s fall offered a much-needed cushion.
TCS, Infosys, and Tech Mahindra emerged as the biggest beneficiaries.
Winners: Pharma Stocks
Indian pharma companies are net exporters. The US market accounts for 35-45% of revenue for top players like Sun Pharma, Dr Reddy’s, and Cipla.
A weaker rupee boosts their realisations. Every fall in the rupee adds 2-4% to overall sales.
Analysts project the rupee’s fall could lift reported revenues by up to 5% and EBITDA by as much as 15% in FY27.
| Pharma Company | US Revenue Exposure |
|---|---|
| Sun Pharma | High (35-45%) |
| Dr Reddy’s | High |
| Cipla | High |
| Zydus Life | Moderate-High |
| Aurobindo Pharma | High |
Elara Securities picked Zydus Life, Sun Pharma, Aurobindo Pharma, Gland Pharma, and Ajanta Pharma as top picks.
Bino Pathiparampil, Head of Research at Elara Securities, said: “Indian pharma companies are, in general, net exporters… All of them are going to benefit significantly from the sharply depreciated rupee”.
Specialty chemicals also gained. Defence and power sectors emerged as market favourites.
Losers: Oil Marketing Companies
India imports over 85% of its crude oil. Payment happens in US dollars. So a weaker rupee makes oil more expensive even if global prices stay flat.
OMC stocks fell up to 30% since the West Asia conflict intensified in late February. HPCL, BPCL, and IOC all took heavy hits.
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The government raised fuel prices by ₹3 per litre in May 2026. This was the first hike in four years. But the rupee’s fall wiped out most of that relief.
| Metric | Value |
|---|---|
| Fuel price hike benefit | ₹52,700 crore (FY27) |
| Estimated total OMC losses | ₹3.6 lakh crore |
| Daily losses (pre-hike) | ₹1,000 crore |
| Daily losses (post-hike) | ₹750 crore |
| Q1 FY27 combined EBITDA loss | ₹60,000-62,000 crore |
SBI Research calculated the math. At crude oil of $106 per barrel and rupee at 94, landed cost was ₹9,964 per barrel. The ₹3 hike gave OMCs ₹477 per barrel benefit. But if the rupee weakens by just ₹2 more, that gain disappears.
Kunal Sodhani, Head-Treasury at Shinhan Bank India, called the fuel hike “more of a temporary painkiller than a permanent cure”.
BPCL may post a net loss of ₹14,381 crore in Q1 FY27. HPCL could lose ₹14,002 crore.
Losers: Airlines
Airlines face a double whammy. Fuel costs rise in rupee terms. Aircraft lease rentals also climb because they are dollar-denominated.
ICRA raised its FY27 loss estimate for Indian airlines to ₹36,000-38,000 crore. Earlier estimates were just ₹11,000-12,000 crore.
| Airline Impact | Details |
|---|---|
| FY26 industry net loss | ₹32,000-34,000 crore |
| FY27 projected loss | ₹36,000-38,000 crore |
| ATF share of operating cost | 35-40% |
| Domestic airfares rise | 19% year-on-year |
IndiGo slipped into a net loss in FY26 despite ₹7,500 crore in underlying profit. The airline blamed “exceptionally sharp rupee depreciation”.
International operations face extra pressure. Aircraft leases, maintenance, and foreign station costs all rise with the dollar.
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Higher airfares also curb demand. ICRA expects discretionary travel to slow as inflation bites.
RBI Intervention: Defending the Rupee
The RBI intervened heavily to slow the rupee’s fall. It sold dollars in the spot market. It used forward contracts. It also tightened rules for banks’ forex exposure.
India’s forex reserves fell $15 billion in a single week in September 2026. This likely reflected RBI’s dollar sales to support the rupee.
| RBI Action | Impact |
|---|---|
| Spot dollar sales | Direct support |
| Forward market intervention | $137 billion net short position |
| Bank forex exposure caps | Forced unwinding of arbitrage trades |
| Special deposit scheme | Raised $143.6 billion |
The RBI’s net short forward positions hit a record $137 billion in July 2026.
The central bank’s tactics worked partially. The rupee’s 1-month implied volatility stayed at 4.2%. That was below the year-to-date average of 5%.
Bank of America analysts said: “We believe RBI is willing to spend incremental reserves to prevent INR weakness beyond 96/USD level”.
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But intervention has limits. The RBI cannot fight the market forever. It can only slow the pace.
The Bigger Picture: Who Wins, Who Loses
The rupee’s fall creates a clear divide in the stock market.
| Sector | Impact | Reason |
|---|---|---|
| IT Services | Positive | Dollar revenues, rupee costs |
| Pharma | Positive | Export earnings in dollars |
| Specialty Chemicals | Positive | Export-oriented |
| Defence | Positive | Domestic orders, less import dependent |
| Oil Marketing | Negative | Import crude in dollars |
| Aviation | Negative | Fuel and lease costs in dollars |
| Paints | Negative | Crude-linked raw materials |
| Consumer Discretionary | Negative | Rising transport and packaging costs |
Every 10% increase in crude prices widens India’s current account deficit by 0.3-0.4% of GDP.
That puts pressure on the rupee. The cycle feeds itself.
What Should Investors Watch?
Three things matter most now.
First, crude oil prices. If Brent falls below $90, the rupee could recover. That would reverse the trade.
Second, FPI flows. Foreign investors sold more in 2026 than all of 2025. If selling stops, the rupee stabilises.
Third, RBI policy. The central bank’s intervention has limits. It cannot hold the rupee alone.
Prashasta Seth, CEO of Prudent Investment Managers, said: “This trend will reverse as things normalise in West Asia”.
But timing is uncertain. The conflict shows no clear end.
Disclaimer
This Article is Only For Educational & Research Purpose. Please Invest wisely.
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