Crisil Intelligence expects the rupee to continue to depreciate against the dollar and settle at 88 by end FY26
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The rupee’s sharp volatility against the US dollar in recent months in the backdrop of continuing geopolitical uncertainties is set to dent the earnings of some sectors by up to 250 basis points (bps) in fiscal year 2026, according to Crisil Ratings’ ‘credit alert’ report.

The sectors include complex fertilizers, airlines, oil and gas (refining and marketing), polyvinyl chloride (PVC) pipes and fittings, capital goods, pharmaceuticals (active pharmaceutical ingredients, or APIs) and renewable power.

Referring to an assessment by Crisil Intelligence (formerly Market Intelligence & Analytics), the report said the rupee is expected to continue to depreciate against the dollar and settle at 88 by end of FY26.

A credit alert conveys the rating agency’s opinion on a sharp and specific development (such as the ongoing global tariff war), and and states that it will revert on the impact of the development on the ratings of those affected.

Costs of import-dependent sectors

Crisil Ratings observed that when the rupee depreciates sharply, sectors with sizeable level of imported/dollar-denominated raw materials will see a substantial increase in their costs without a corresponding increase in their revenues and hence their earnings are likely to be impacted adversely in the near-term.

“The rupee moved from ₹83.81 to the dollar on October 1, 2024, to ₹87.40 on February 28, 2025, before appreciating to ₹85.65 on April 3, 2025. This is against an annual rupee depreciation of 1-2 per cent seen over the preceding two years through September 2024. While there has been some appreciation off late, Crisil Intelligence expects the rupee to continue to depreciate against the dollar and settle at ₹88 by end fiscal 2026,” per the report.

The agency assessed that the extent of impact of the rupee’s volatility against the dollar on sectors will depend on the exposure to foreign trade, ability to pass on the cost increase, and hedging practices. There might also be player-specific impact across sectors based on the extent of unhedged foreign currency debt exposure.

May benefit IT, textile, marine foods

On the other hand, a depreciating rupee could drive up, to some extent, earnings of sectors such as information technology (IT), home textiles and marine foods, which are net exporters.

Crisil Ratings stated the impact may not be material for other sectors with sizeable overseas trade exposure such as pharmaceuticals (formulations), chemicals, primary steel producers, gems & jewellery, ceramics, city gas distribution and edible oil due to the presence of a natural hedge and/or high propensity to pass on the incremental cost to customers.

The overall impact on the credit profiles of companies in the Crisil Ratings portfolio is seen neutral, per the report.

The agency noted that while the near-term impact on earnings of corporates remains monitorable, the overall credit impact is likely to be neutral as it will get neutralised over the medium term once businesses adapt to the new currency levels.

The company-specific impact will also depend on the proportion of outstanding debt exposure in dollars and hedging practices adopted, as rupee depreciation would inflate liabilities and lead to higher debt obligations and/or mark to market losses, which could impact the credit profile if the amounts involved are significant.

Published on April 8, 2025