U.S. dollar gains ground against the Indian rupee, plummeting to a record low due to tariff concerns.

The Indian Rupee has experienced a significant decline, reaching an all-time low against the US Dollar on Friday. The rupee settled at 88.1950, marking a 0.65% decrease and the biggest one-day loss since May.

This downward trend is a continuation of a four-month slide for the rupee against the dollar. On Wednesday, the US doubled tariffs to India, reaching 50%, the highest for any Asian country. This move by the US was aimed at punishing New Delhi for Russian oil imports and escalating an economic war with global ripple effects.

Analysts at Crisil Ratings predict that the rupee's volatility against the US dollar could dent the earnings of some sectors by up to 250 basis points in fiscal 2026. This volatility has caused concern for India's domestic economy, with the US tariff increase being a significant factor.

The rupee breached the 88-rupee-per-dollar mark for the first time during intraday trading, reaching a record of 88.3075 versus the greenback. The extent of impact on sectors will depend on their exposure to foreign trade, ability to pass on cost increases, and hedging practices. Unhedged foreign currency debt exposure could lead to player-specific impact across sectors.

The decline in the rupee has also affected India's stock market benchmarks. For August, the Bombay Stock Exchange Sensex and Nifty 50 experienced a 1.7% and 1.4% decline, respectively. Players in India's gold and jewellery sector are pivoting towards manufacturing and exporting hubs like the Gulf to offset the effects of high US tariffs. India has identified countries including Vietnam as alternative export markets to avoid the impact of US tariffs.

Domestic support from the Reserve Bank of India (RBI) and the government could bolster local equities, according to Ipek Ozkardeskaya, a senior analyst at Swissquote Bank. However, no indication has been given by the RBI that they will intervene to support the rupee.

The US tariff increase and the subsequent slide in the rupee could have far-reaching effects on various sectors in India. It remains to be seen how these sectors will adapt and recover from these challenges.

U.S. dollar gains ground against the Indian rupee, plummeting to a record low due to tariff concerns.