Indian Rupee Slides to 92 Per Dollar: What This Means for India ETF Investors

India’s currency has entered 2026 in a state of significant distress, with the rupee declining to 92 per U.S. dollar—a new record low that reflects mounting macroeconomic pressures. This sharp weakness in the rupee, or approximately 0.67 dollars in rupees equivalent, stands in stark contrast to India’s upgraded economic growth forecast, creating a complex environment for equity market participants and ETF investors seeking exposure to the world’s fastest-growing major economy.

The timing of the rupee’s decline is particularly noteworthy. As of January 23, 2026, the Indian currency had fallen significantly, coinciding with a 6.4% pullback in the MSCI India Index during the same period. Yet beyond this headline currency movement lies a more nuanced story about India’s investment appeal and the risks embedded in current valuations.

Capital Flight and Trade Imbalances Drive Currency Pressure

The rupee’s weakness is not random. Rather, it reflects a confluence of structural and cyclical pressures that have intensified over recent months.

Foreign portfolio investment (FPI) has turned sharply negative, as global investors rotated capital toward cheaper valuations elsewhere and safer havens amid rising geopolitical tensions. Throughout 2025, foreign investors withdrew approximately $18 billion from Indian equities. This outflow accelerated into early 2026, with $846 million in foreign fund withdrawals recorded in just the first two trading sessions of January. The pattern suggests a broader “risk-off” sentiment, as investors sought shelter in alternative emerging markets like China or traditional safe-haven assets such as gold.

India’s trade structure adds another layer of downward pressure on the rupee. As a major importer of crude oil and electronics, the nation’s trade deficit expanded to over $25 billion in recent months. Rising oil prices have forced Indian corporates to aggressively purchase dollars for hedging purposes, further straining the rupee. The import burden, combined with global uncertainty surrounding U.S.-India trade negotiations, has created a self-reinforcing cycle of currency weakness.

Geopolitical Uncertainty Amplifies Market Volatility

Recent geopolitical rhetoric has rattled global markets, and India has not been insulated from these shocks. Discussions surrounding trade tariffs, tensions over strategic assets, and the stalling of bilateral trade discussions have created a “risk-off” environment that disproportionately affects emerging market currencies like the rupee.

This uncertainty has coincided with a period of underperformance in Indian equities. The MSCI India Index rose just 2.2% in dollar terms on a total-return basis as of December 19, 2025, significantly lagging the 29.9% gain posted by the broader MSCI Emerging Markets Index. Such divergence suggests that India’s equity market has struggled to compensate investors for currency and geopolitical risks during this period.

The Paradox: Weak Currency, Strong Fundamentals

Despite the rupee’s steep decline, there is a silver lining to this otherwise gloomy currency story. The International Monetary Fund (IMF) recently revised upward India’s 2026 growth forecast to 6.4%, an improvement of 20 basis points from prior expectations. This divergence between currency weakness and economic strength creates what could be characterized as a classic valuation opportunity.

The logic is straightforward: Indian companies remain fundamentally sound and are generating earnings in a growing economy. However, those earnings are now available to foreign investors at a currency-adjusted discount due to rupee depreciation. For long-term investors with conviction in India’s growth narrative, this dynamic presents an entry point into high-quality assets at reduced valuations.

The challenge, however, lies in sizing exposure appropriately. Further rupee depreciation could erode returns, and the flow dynamics that have driven recent outflows may persist if global uncertainty remains elevated.

India ETF Landscape: Three Options for Discerning Investors

For those seeking broad exposure to India’s equity market while managing currency and concentration risks, exchange-traded funds offer a structured approach. Three funds merit consideration:

WisdomTree India Earnings Fund (EPI): Profitability at Scale

EPI manages approximately $2.58 billion in assets and provides exposure to 557 profitable Indian companies across the equity market. The fund’s portfolio is anchored by blue-chip holdings: Reliance Industries (7.05%), HDFC Bank (5.75%), and ICICI Bank (5.25%).

Over the past 12 months, EPI returned 2.4%, reflecting the challenging environment for Indian equities amid the rupee’s decline. The fund carries an expense ratio of 84 basis points, reflecting its more specialized focus on profitable firms rather than broad-market indices.

Franklin FTSE India ETF (FLIN): Large and Mid-Cap Diversification

FLIN operates with $2.75 billion in total assets and offers investors exposure to 276 large and mid-capitalization Indian companies. Its top holdings—HDFC Bank (6.63%), Reliance Industries (6.04%), and ICICI Bank (4.53%)—overlap considerably with EPI but benefit from a broader underlying index.

The fund’s 12-month return stands at 2.4%, identical to EPI, though FLIN’s lower expense ratio of 19 basis points makes it more cost-efficient for long-term investors. This lower fee structure may prove advantageous as investors navigate volatile currency conditions over extended time horizons.

First Trust India NIFTY 50 Equal Weight ETF (NFTY): Democratizing India’s Top 50

NFTY provides exposure to India’s 51 largest and most liquid securities listed on the National Stock Exchange of India, with a notable twist: equal weighting rather than market-cap weighting. This approach distributes portfolio weight evenly among holdings such as Tata Steel (2.28%), Hindalco (2.24%), and JSW Steel (2.20%).

With $160.9 million in assets, NFTY is the smallest of the three funds but has delivered the strongest recent performance, gaining 3.5% over the past year. Its 81 basis point expense ratio reflects the costs associated with maintaining an equal-weight structure. The equal-weight approach may appeal to investors seeking broader exposure to India’s mid-tier industrial and financial companies.

Strategic Considerations for ETF Investors

The case for India ETF exposure rests on a fundamental conviction: that currency headwinds are temporary, while economic growth is structural. The rupee’s decline to 92 per dollar, or 0.67 dollars in rupees terms, presents both risk and opportunity.

For risk-conscious investors, the FPI outflows and trade imbalances warrant caution about position sizing. However, for those with a multi-year investment horizon, the combination of depressed valuations and upgraded growth forecasts suggests that selective exposure through these three ETFs could reward patient capital.

The key is to enter with clear risk management protocols in place, given the elevated currency volatility. Staged accumulation, rather than lump-sum deployment, may allow investors to capture the valuation opportunity while protecting against further rupee weakness in the near term.