Rupee does not need emergency intervention; depreciation likely to be mild: Neelkanth Mishra

Rupee weakness likely to remain mild, no need for emergency steps: Neelkanth Mishra

The rupee’s recent weakness does not warrant emergency intervention and any further depreciation is likely to be gradual rather than sharp, according to Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital.

Speaking in an interview with Moneycontrol, Mishra said the rupee’s movement should be viewed in the context of a tougher global financial environment marked by higher global bond yields and tighter financial conditions. “First things first, the rupee is not behaving in a manner which requires emergency medicine,” he said, adding that the current backdrop reflects a much harder global financial environment.

The Indian rupee has been the worst-hit currency in Asia, having weakened 4.75 percent in 2025 and declining by around 2 percent so far in 2026.

Mishra pointed out that India’s strong foreign exchange reserves provide a sufficient buffer against any balance of payments stress. “India does have us $675-$700 billion of reserves. So, a balance of payments issue can get addressed,” he said, adding that there is no need for emergency intervention.

According to Mishra, part of the pressure on the rupee is linked to changes in hedging behaviour following an earlier attempt to stabilise the currency. He said the effort to hold the currency around 83 to the dollar led to a sharp fall in hedging ratios. “A lot of the pressure we see now is the aftermath of the unwise attempt to have tried to peg the USD at 83,” he said, adding that once the peg broke, importers and investors moved quickly to rebuild their hedges.

He noted that even long-term investors who remain positive on India have stepped up currency hedging. “What we are hearing now is that even hard money, real investors who really believe in the India story have now gone and hedged,” Mishra said.

Mishra stressed that there is no underlying balance of payments stress driving the rupee’s movement. Looking ahead, he said expectations around currency movements need to be calibrated, as currencies lack a clear valuation anchor. While the rupee does not need to weaken further to support exports, some depreciation cannot be ruled out. “The rupee doesn’t need to fall any further to make India’s exports competitive, but mild, not wild depreciation is a reasonable number to work with,” Mishra said.

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