**Market Brief: Rupee Hits Record Lows Amidst Bond Yield Surge** **Rupee Under Pressure** The Indian rupee has depreciated to a historic low, breaching the **92.00** mark against the US dollar in late January 2026. Persistent demand for the greenback, driven by month-end importer hedging and elevated US bond yields, has intensified pressure on the domestic currency. Despite India’s resilient economic growth, the rupee is facing headwinds from sustained foreign portfolio outflows and broad strength in the dollar index. **Bond Markets & Yields** Indian government bonds are witnessing a downturn, with the benchmark 10-year yield climbing to approximately **6.7%**, a 10-month high. Traders remain cautious ahead of the upcoming Union Budget, where government borrowing for FY27 is projected to reach record levels of **₹16–17.5 trillion**. The surge in state government bond issuance has further strained market appetite, adding supply-side pressure that is outweighing immediate support from domestic institutions. **RBI's Balancing Act** The Reserve Bank of India (RBI) is navigating a complex liquidity landscape. While the central bank defends the rupee through dollar sales—which drains rupee liquidity—it has simultaneously announced a massive **₹3 trillion** infusion plan. This includes Open Market Operations (OMOs), Variable Rate Repos (VRR), and a forex swap to ensure the banking system remains liquid. However, markets remain concerned that the liquidity drained by forex interventions could partially negate the impact of these injection measures. **Foreign Flows & Sentiment** Investor sentiment is dampened by weak foreign inflows, with Foreign Portfolio Investors (FPIs) remaining net sellers in January 2026. Global capital is currently pivoting toward US markets and AI-centric hubs, leaving emerging market debt under pressure. Traders are now keenly awaiting the February 1 budget announcements to gauge the government's fiscal consolidation path and borrowing calendar.