Rupee Undervalued, RBI Governor Says, Even as He Promises Stability: What Sanjay Malhotra Said on 7 October, Why the Rupee Hit 97 Against the Dollar, the RBI’s Tools and What It Means for Importers, Exporters and Investors
- October 7, 2026
- Posted by: Ankit Jaiswal
- Category: News
7 Oct: Governor says rupee may be undervalued per REER. Rupee hit 97.15, lowest since 20 May. RBI to ensure stability, no excessive volatility. Repo hiked to 5.50%.
Quick Answer
Rupee undervalued was the message from RBI Governor Sanjay Malhotra on 7 October, when he said that by a number of estimates, including the real effective exchange rate, the rupee is not overvalued and may be undervalued, while promising that the RBI will ensure it stabilises and finds its correct value. He added that the RBI will support an orderly movement and prevent excessive volatility, and that markets can be irrational in the short term but reflect value over time, even as the rupee weakened to 97.15 against the dollar, its lowest since 20 May 2026, after opening near 96.57. The pressure comes from the West Asia conflict, oil near $100, record foreign equity selling and strong dollar demand, and the RBI has used a concessional swap window for FCNR(B) deposits and bond issuances plus a 25 bps rate hike to 5.50%. The Governor’s comments do not set a rate, so importers, travellers and borrowers should plan for volatility while exporters gain.
Rupee undervalued is a rare phrase from a central bank that normally avoids comment on the level, and it follows a similar remark by Deputy Governor Poonam Gupta on 24 September that there is a case for the rupee to stabilise and appreciate. The currency has lost about 9% against the dollar since November 2025, when it traded near 88.7.
If you want to know what the Governor said and what it means, this article covers the rupee undervalued remarks, the rupee vs dollar move from 96.57 to 97.15, why it is weak with oil and dollar demand, what REER says, the tools the RBI governor is using including the FCNR(B) swap window and volatility control, who gains, such as TCS and other exporters, and who loses, scenarios and what to watch.
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What the Governor Said: The Rupee Undervalued Remarks
| Topic | Governor Malhotra’s remark on 7 October |
|---|---|
| Valuation | By a number of estimates, including the REER, the rupee is not overvalued and may be undervalued |
| Stability | The RBI will ensure the rupee stabilises and finds its correct value |
| Orderly movement | It will support orderly movement and ensure no excessive volatility |
| Market behaviour | Markets can be irrational in the short term but reflect the right value in the long run |
| External sector | Headwinds affected capital flows, and pressure on the current account is temporary |
| Earlier signal | Deputy Governor Poonam Gupta said on 24 September that there is a case for the rupee to stabilise and appreciate |
The RBI has said before that it does not target a level for the rupee, so the rupee undervalued message is about volatility and not about a fixed rate.
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Rupee Undervalued but Weak: The Rupee vs Dollar Move
| Date | Rupee per dollar | Note |
|---|---|---|
| Late November 2025 | About 88.7 | Earlier reading |
| 29 September 2026 | About 96.39 high | Rupee weakened 0.2% that day |
| 7 October, early trade | About 96.57, down 22 paise | After the rate hike |
| 7 October, intraday | 97.15 | Lowest since 20 May 2026 |
| Fall since November 2025 | About 9% | 88.7 to 97.15, my calculation |
Even with the rupee undervalued on REER, the currency recovered for only a few days after the RBI opened a concessional swap facility for FCNR(B) deposits and bond issuances, but it has weakened again in recent sessions.
Why the Rupee Undervalued Claim Coexists With a Weak Rupee
- Oil near $100 raises India’s import bill and the demand for dollars.
- The West Asia conflict and global uncertainty push investors toward the dollar.
- Foreign investors have sold a record amount of Indian equities this year.
- US Treasury yields near 5.3% and a strong dollar attract global capital to the US.
- Importers and oil companies buy dollars aggressively when the rupee falls, which can feed the slide.
A rupee undervalued on REER, which adjusts for inflation differences against trading partners, can still weaken in the short run, because flows and sentiment drive the market.
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RBI Tools Behind the Rupee Undervalued Message
| Tool | What it does | Status |
|---|---|---|
| Concessional swap window | Offers swaps on concessional terms for FCNR(B) deposits and bond issuances to attract dollars | Banks mobilised large FCNR(B) inflows |
| Forex intervention | Selling dollars to smooth sharp falls | Available; the RBI says it does not target a level |
| Interest rates | A 25 bps hike to 5.50% narrows the rate gap with the US | Done on 7 October |
| Forex reserves | A buffer to support orderly moves | The RBI has called them healthy earlier |
| Communication | Statements on valuation and stability to anchor expectations | The undervalued remark |
These tools can slow a fall and support the rupee undervalued message but cannot reverse global forces such as oil and US yields.
Who Gains and Who Loses When the Rupee Is Weak
| Group | Effect | Why |
|---|---|---|
| IT and pharma exporters | Gain | Dollar revenue converts into more rupees; TCS reports on 8 October |
| Importers and oil marketing companies | Lose | Costlier crude and imports |
| Students and travellers abroad | Lose | Higher cost of fees and travel |
| Borrowers with foreign currency loans | Lose | Repayments cost more rupees |
| Foreign investors in India | Lose in dollar returns | A weak rupee cuts the value of gains |
| Gold buyers in India | Cushioned | Gold is down less in rupees than in dollars |
| Inflation | Higher | Imported inflation adds to the RBI’s concern |
The rupee undervalued remark does not change who gains and who loses from a weak currency, only how long the RBI expects the pressure to last.
Scenarios After the Rupee Undervalued Remarks
| Scenario | What would drive it | Effect |
|---|---|---|
| Rupee stabilises near 96 to 97 | Oil eases, RBI swap inflows and calmer markets | Supports equities and bonds |
| Rupee recovers toward 94 to 95 | Oil falls and foreign flows return | Helps importers and inflation |
| Rupee weakens past 98 | Oil spikes, US yields rise and FPI selling continues | Raises inflation and RBI pressure |
The scenario table for the rupee undervalued debate is illustrative and not a forecast.
Risks to the Rupee Undervalued Case If the Rupee Keeps Falling
Imported inflation: A weaker rupee can push CPI above the RBI’s 5.2% forecast.
Rate pressure: A further fall may force more rate hikes, such as the December hike some economists expect.
Foreign flows: A falling rupee can trigger more equity selling and test the rupee undervalued view.
Oil shock: A spike in crude would raise the import bill again.
Credibility: The rupee undervalued claim raises expectations that the RBI must meet with action.
What to Watch Next After the Rupee Undervalued Remarks
- The rupee level against the 97 mark and the RBI’s intervention.
- Crude oil prices and West Asia developments.
- FCNR(B) and other inflows under the swap window.
- Foreign portfolio flows and US Treasury yields.
- September inflation data and the next RBI policy in December.
Conclusion
The RBI Governor said the rupee undervalued by a number of estimates, including REER, and promised stability, yet the rupee slid to 97.15 against the dollar on 7 October, its lowest since May. Oil, foreign selling and dollar demand are the forces to watch, and the RBI’s tools can smooth but not reverse them. Consult a SEBI-registered advisor before making any decision.
Disclaimer: Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
Frequently Asked Questions
What did the RBI Governor say about the rupee?
Ans. On the rupee undervalued question, Sanjay Malhotra said that by a number of estimates, including REER, the rupee is not overvalued and may be undervalued, and the RBI will ensure it stabilises.
Where is the rupee vs dollar rate?
Ans. It opened near 96.57 on 7 October and weakened to 97.15, its lowest since 20 May 2026.
What does REER mean?
Ans. The real effective exchange rate measures a currency against a basket of trading partners, adjusted for inflation differences.
Why is the rupee falling if it is undervalued?
Ans. Oil near $100, the West Asia conflict, foreign equity selling and strong dollar demand drive short-term moves.
What is the RBI doing to support the rupee?
Ans. Behind the rupee undervalued message, a concessional swap window for FCNR(B) deposits and bond issuances, intervention to curb volatility and a 25 bps rate hike to 5.50%.
Who benefits from a weak rupee?
Ans. In the rupee undervalued debate, exporters such as IT and pharma companies gain, while importers, students abroad and oil marketing companies lose.
Will the RBI defend a particular rupee level?
Ans. The RBI has said it does not target a level, and the rupee undervalued remark aims to prevent excessive volatility.
Should I buy dollars or foreign assets now?
Ans. This article does not constitute investment advice. Currency moves are uncertain even with the rupee undervalued. Consult a SEBI-registered financial advisor.
