Indian Rupee Unlikely to Breach 100 Against US Dollar Despite High Crude Oil Prices

Surging crude oil prices driven by Middle East geopolitical tensions will act as a key ceiling for Indian stock market rallies, though strong valuations and support levels near 23,800 will cushion major downsides, according to Shrikant Chouhan, Head of Equity Research at Kotak Securities.

Analyzing the macroeconomic risks of elevated oil prices, Chouhan projected that if crude prices sustain above $85 per barrel, it will impact the balance of payments, current account deficit, and inflation. Retail inflation could climb to 4.8-5.2% from the current 4.1%. If crude surges past $105 per barrel, real GDP growth could slow to 5.5-5.8%.

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In the base-case scenario, if crude prices sustain above the mark of USD 85... it will start impacting the balance of payments, the current account deficit, and eventually inflation.

On the currency front, Chouhan assured that despite macro headwinds, the Indian Rupee is unlikely to breach the 100 mark against the US Dollar. He expects the currency to depreciate to a maximum of 97 if current crude prices sustain at $85 per barrel. In case crude prices jump to $105, he predicts 98 should be the worst-case level. An easing of war tensions could see the currency appreciate back to 94-94.5 levels.

Chouhan expects near-term consolidation in domestic equity markets with a buy-on-dips approach. He identified 23,800 as a robust technical support zone and projected the Sensex/Nifty to trade within a broader consolidation band of 23,000 to 25,000. He highlighted sectoral support in BFSI and IT, emphasizing that foreign institutional investors turning net buyers signals a capital shift from overextended global AI stocks to value-driven IT services and domestic markets.

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In case current crude prices sustain at USD 85 per barrel, then we are expecting our currency to maximum depreciate to levels of 97... In case crude prices jump to USD 105, then we are predicting 98 should be the worst-case level.