@U.S that observation about IT and Pharma not playing the textbook “weak rupee = winners” script has been bugging me too, and I think it ties into something I missed in the original post above. The framing in the TL;DR was oil + geopolitics + FII outflows, which is the standard explanation. But Jefferies put out a note last week that adds a fourth factor I had completely underweighted, and it changes how I am thinking about the whole thing.
Their argument is that the rupee weakness is not really about CAD or oil at the margin anymore. It is about the capital account. FPIs sold $44 billion of Indian equities since April 2024, and because our SIP flows absorbed all of it on the equity side, the index stayed stable but the FX market took the full hit. The April AMFI data shows ₹38,440 crore of net equity inflow in a single month, almost a quarter of what FPIs dumped across all of FY26.
That actually explains the IT/Pharma puzzle you raised. If the rupee weakness is being driven by FPI exits rather than fundamentals, the same FPIs are also exiting IT and Pharma names heavily. So you get the weak-rupee tailwind on paper, but the selling pressure on the stocks themselves swamps it. The textbook setup assumes broad foreign interest, and right now we do not have that.
Put together a longer write-up on this with how Korea and Japan have lived through the same pattern, would love your take: Jefferies just blamed our SIP for the rupee’s fall. Is that fair?
@t7support to your point on price being the leading indicator, you are right. The mechanism stuff is almost always a lagging explanation. But the question for me is whether the new equilibrium (deep domestic flows + thin FPI participation) is now permanent, because if it is, IT and Pharma may keep behaving the way they are even when oil settles.