As of March 2026, the Indian rupee's exchange rate against the US dollar has dropped to an unprecedented low, exceeding 95. This decline is attributed to geopolitical tensions in the Middle East, rising crude oil prices, and significant foreign portfolio outflows, which totaled over $11 billion in March alone. India imports over 80% of its crude oil, and as Brent crude prices surpassed $102 per barrel, the current account deficit widened, complicating the Reserve Bank of India's (RBI) monetary policy efforts.

The RBI's aggressive intervention, including net forward dollar sales nearing $100 billion, has not fully mitigated the rupee's depreciation, which has raised the debt service costs for companies with dollar-denominated liabilities. For instance, a manufacturer that borrowed at an exchange rate of ₹82 now faces a repayment cost nearly 15% higher due to the rupee's decline.

Despite these challenges, opportunities exist in India's distressed asset market, with the recent overhaul of the External Commercial Borrowing (ECB) framework providing new avenues for restructuring. However, currency volatility is reshaping investment strategies, with a clear shift towards assets that offer natural hedges against rupee depreciation. Investors must now incorporate currency risk into their pricing models and transaction structures to navigate this complex environment effectively.