Rupee outperforms Asian peers, clocks biggest single-day gain since December 2018

The rupee led a broad rally across Indian assets after the US sharply cut tariffs on Indian goods, lifting a key overhang on domestic markets.

The local currency rallied as much as 1.4% against the US dollar, clocking its biggest single-day gain since December 2018. The worst-performing Asian currency last year outpaced its regional peers by a wide margin on Tuesday, rising 1.24 against the greenback to close at 90.27. The rupee had lost 4.8% in 2025 and is now just shy of a 40-paise gain from turning positive for the year.

While the rupee and bonds managed to hold on to most of their gains, equities retreated from the day’s highs after surging as much as 5% in morning trade. Nevertheless, the benchmark Nifty 50 ended 639 points higher at 25,728. The near 3% rise in equities marked the biggest single-day gain since May 12, 2025.

The bond market reaction, however, was relatively muted amid concerns over India’s record-high borrowing programme. The yield on the 10-year benchmark bond closed 4 basis points (bps) lower at 6.73%, after declining as much as 6 basis points during the day trade.

So far, it is clear that the US will lower tariffs on Indian goods from 50% to 18%. While this remains higher than tariffs imposed on the UK, European Union, and Japan, it is lower than levies on China, Brazil, Indonesia, Vietnam, Bangladesh, and Pakistan.

Market participants said a strengthening rupee could help rekindle overseas investor interest in the world’s fifth-largest equity market. Foreign portfolio investors (FPIs) have sold nearly $22 billion worth of Indian equities since January 2025, pressured by stretched valuations and a weakening currency.

Commenting on the India–US trade deal, Elara Capital said that an 18% tariff rate brings India broadly in line with peers, and even slightly lower than competing economies such as Bangladesh, Vietnam, and Thailand. The domestic brokerage expects USD/INR to reverse direction and move towards the 88.50–89 range in the coming weeks as FPI flows turn positive.

Also read: Rupee hits all-time low of 91.99: What’s driving the slide against the dollar

According to Harish Krishnan, CIO – Equity at Aditya Birla Sun Life AMC, the only factor hurting foreign investors was rupee depreciation. Valuations were another concern for FPIs, but that has now corrected. However, he added that, unfortunately for the markets, the supply of paper has remained relentless.