India's Rupee Tumbles to 0.73 Dollars Mark: Why 3 ETFs Merit Investor Scrutiny

India’s currency has entered 2026 under severe duress, with the rupee sliding to historic lows against the dollar—hitting approximately 92 rupees per USD as of late January. This significant weakening, occurring just ahead of India’s Republic Day celebrations, has thrust the nation’s equity markets and investment vehicles into sharp focus. While India’s economic engine continues to hum with impressive growth prospects, the currency volatility presents a paradoxical situation for ETF investors seeking exposure to one of the world’s fastest-growing economies. At the heart of this paradox lies a curious dynamic: as the rupee depreciates relative to 0.73 dollars per rupee (conversely, roughly 92 rupees per dollar), foreign investors gain a currency-adjusted discount on Indian assets—but simultaneously face heightened volatility and elevated risk. Understanding what’s behind this rupee weakness and which India-focused ETFs might capitalize on the opportunity requires digging deeper into the macroeconomic forces at play.

Foreign Capital Exodus: The Primary Driver of Currency Decline

The rupee’s recent deterioration reflects a coordinated retreat of foreign portfolio investors seeking safer harbors amid global uncertainty. Over the course of 2025, international investors withdrew approximately $18 billion from Indian equities, according to Reuters reporting. This trend accelerated into January 2026, with another $846 million in outflows occurring during the month’s first two trading sessions alone. The timing and scale of these departures reveal a systematic reallocation of capital, as global money managers rotated their positions toward cheaper valuations in alternative emerging markets or toward assets viewed as more defensive. This capital flight placed sustained downward pressure on the rupee’s value, pushing it toward previously unthinkable levels and amplifying currency depreciation dynamics that ripple through equity market valuations for foreign holders.

Geopolitical Tensions and Trade Friction Amplify Pressure

Beyond capital flows, broader geopolitical headwinds have compounded the rupee’s weakness. Washington’s recent rhetoric surrounding the Greenland dispute and potential tariff escalation against nations with Russian trade ties have unsettled global markets. For India specifically, this uncertainty arrives at a delicate moment: bilateral U.S.-India trade negotiations stalled in early 2026, removing a potential anchor for investor sentiment. Additionally, India’s position as a major energy and electronics importer has intensified its vulnerability. The nation’s trade deficit ballooned to over $25 billion last month, driven by surging crude oil import costs and elevated bullion prices. Domestic corporations scrambled to purchase dollars for hedging purposes, creating additional downward pressure on the local currency in recent weeks.

The 2026 Outlook: Economic Fundamentals vs. Currency Challenges

Looking ahead, analysts caution that INR weakness may persist if geopolitical tensions remain unresolved or if the Federal Reserve maintains elevated interest rates throughout 2026. However, a counterweight emerged in the form of an upgraded GDP forecast from the International Monetary Fund, which raised India’s 2026 growth outlook to 6.4%—an increase of 20 basis points. This divergence is instructive: while the currency market reflects near-term pessimism and flow dynamics, India’s actual economic productivity continues outpacing global peers, including China and the United States. For ETF investors, this creates a classic value scenario—an opportunity to purchase fundamentally sound companies at currency-adjusted discounts. The challenge lies in balancing this opportunity against ongoing devaluation risk and the unpredictable nature of foreign portfolio flows.

Three India ETFs Positioned Amid Currency Volatility

For investors contemplating exposure to India’s equity market despite near-term headwinds, three funds warrant consideration:

WisdomTree India Earnings Fund (EPI) maintains $2.58 billion in assets, providing diversified exposure across 557 profitable Indian companies. Its largest holdings—Reliance Industries (7.05%), HDFC Bank (5.75%), and ICICI Bank (5.25%)—represent blue-chip names anchoring India’s financial and energy sectors. The fund has returned 2.4% over the trailing twelve months and charges 84 basis points in annual fees.

Franklin FTSE India ETF (FLIN) oversees $2.75 billion and tracks 276 large- and mid-cap Indian securities. Its portfolio composition—led by HDFC Bank (6.63%), Reliance Industries (6.04%), and ICICI Bank (4.53%)—reflects exposure to India’s banking and industrial powerhouses. FLIN has delivered 2.4% in returns over the past year while charging just 19 basis points annually, making it a cost-efficient option.

First Trust India NIFTY 50 Equal Weight ETF (NFTY) offers a more specialized approach with $160.9 million under management, providing equal-weighted exposure to the 51 largest and most liquid securities on India’s National Stock Exchange. Its holdings span diversified sectors, with Tata Steel (2.28%), Hindalco (2.24%), and JSW Steel (2.20%) comprising its three largest positions. NFTY has appreciated 3.5% over the past year and carries an 81 basis point fee structure.

Making an Informed Decision: The Path Forward

The convergence of currency weakness, capital outflows, and geopolitical uncertainty has created a complex backdrop for India ETF investors. Yet beneath these short-term turbulences lies an economy expanding at rates that rival or exceed most developed peers. Investors contemplating India exposure should view the current rupee depreciation—now trading near 0.73 dollars per rupee equivalent—as both a warning signal and a potential entry point. The three funds highlighted above represent different approaches to capturing India’s growth narrative while managing currency volatility. However, position sizing and risk tolerance remain paramount considerations given the fluid nature of foreign portfolio flows and ongoing macroeconomic uncertainties. Those with a multi-year investment horizon and comfort with periodic volatility may find the current environment presents a rare opportunity to accumulate exposure at attractive currency-adjusted valuations.