Rupee May Crash To 100 Against US Dollar By June 2027; AI Investment Slowdown Could Trigger FPI Return To India

The Indian rupee could weaken to 100 against the US dollar by June 2027, despite its recent stability, as underlying economic pressures continue to weigh on the currency, according to an Axis Bank Research report released on Wednesday. However, a slowdown in global artificial intelligence (AI) investments and a possible reversal in foreign portfolio investor (FPI) outflows could redirect international capital towards Indian markets.

The report suggests that a shift in global capital flows could help bring India's financeable current account deficit (CAD) back to 0.8% of GDP. It also cautions that the country's foreign exchange reserve adequacy remains low, highlighting the need to rebuild external financial buffers.

The forecast indicates that underlying economic fundamentals could eventually outweigh the rupee's recent stability, keeping pressure on the currency despite potential changes in global investment flows.

Why Axis Bank Research Sees Rupee At 100 Against Dollar

According to the report, India's external position remains vulnerable because of sizeable external liabilities and relatively low foreign exchange reserve adequacy.

The country's reserves remain low under both traditional measures and the International Monetary Fund's Assessing Reserve Adequacy (ARA) metric.

The report also flagged the Reserve Bank of India's substantial short foreign exchange positions. It estimated that around $200 billion in these positions have maturities exceeding one year, including approximately $150 billion in the three-to-five-year maturity bucket.

These exposures add to concerns about India's external financial position and the need to strengthen foreign exchange buffers.

AI Investment Slowdown Could Redirect Global Money Towards India

One potential factor that could change the outlook for Indian markets is a slowdown in the global artificial intelligence investment cycle.

The report suggested that a moderation in AI-related capital expenditure, combined with a reversal in recent FPI outflows, could redirect global financial savings towards Indian assets.

Such a shift could improve the availability of foreign capital for India and potentially bring the financeable current account deficit back to 0.8% of GDP.

However, the report also warned that global savings could remain constrained. Rising government debt amid geopolitical conflicts and the fading of the economic benefits associated with a period of relative peace could limit the amount of international capital available for investment.

"Continued squeezing of global savings owing to fading of the peace dividend also limits availability of savings to chase India assets," the report noted.

Lower Crude Oil Prices May Not Be Enough To Support Rupee

The report also questioned whether a decline in crude oil prices alone would be sufficient to improve the rupee's outlook.

It pointed out that the Indian currency had started losing value even when the current account deficit was relatively low. This suggests that factors beyond India's oil import bill are influencing the exchange rate.

Consequently, even a reduction in crude prices may not lead to a meaningful improvement in the rupee unless broader external financial pressures ease.

India's GDP Growth Seen At 7.8% In Q2 FY27

Separately, another report projected that India's economy would maintain strong growth momentum in the second quarter of the 2026-27 financial year despite continuing global uncertainties.

India's gross domestic product (GDP) is expected to expand by around 7.8%, supported by resilient domestic demand, corporate performance and strong credit growth.

The growth outlook points to continued strength in the domestic economy even as the rupee faces pressure from external liabilities, global capital movements and changing international investment patterns.