The Indian rupee breached the 88 level against the dollar for the first time on Friday, while the domestic stock market tanked 2 per cent in the week ended August 29, amid uncertainties over higher US tariffs on Indian exports and continued outflows from foreign investors.The rupee plunged 57 paise – marking the biggest single-day fall in a month – to close at a record low of 88.20 against the US currency. The local currency opened at 87.69 on Friday compared to the previous close of 87.63. It declined to 88.31 during intraday trades.During the week ended August 29, the BSE’s 30-share Sensex fell 1.84 per cent, or 1,497.2 points, to close at 79,809.65, and the Nifty 50 lost 1.78 per cent, or 443.25 points to finish at 24,426.85.Foreign Portfolio Investors (FPIs) have been net sellers in Indian equities for the last two months, offloading Rs 52,734 crore worth of shares in July and August. They sold Rs 17,741 crore in July and Rs 34,993 crore in August on a net basis.“The weakness (in the rupee) is being driven by the India–US trade war, which continues to weigh on sentiment. There has been steady hedging demand from importers, coupled with FPI outflows from both debt and equity,” said Anindya Banerjee, Head Currency and Commodity Research, Kotak Securities.The US imposed 50 per cent tariffs on Indian goods exports to America from August 27.A weaker currency acts as a cushion for exporters facing tariff challenges, effectively working as a stimulus to keep them competitive. Historically, whenever trade disputes with the US escalate, the currencies of affected countries have tended to depreciate against the dollar, Banerjee said.Story continues below this adWith the US as India’s largest export destination, nearly $60 billion worth of shipments are now exposed to steep tariff barriers. Sectors such as textiles, gems & jewellery, shrimp, carpets, and furniture stand in the firing line, raising fears of heavy export losses, said Amit Pabari, Managing Director, CR Forex.“With export earnings expected to fall while imports stay firm, pressure on India’s trade balance has only added to the rupee’s weakness,” he said.On Friday, the Sensex ended Friday’s trade on a subdued note, slipping 270 points to close at 79,809.65 as persistent concerns over fresh US tariffs on Indian exports weighed on investor sentiment and kept foreign inflows under pressure.In the week, the benchmark indices, Sensex and Nifty, witnessed selling pressure at higher levels.Story continues below this ad“We are of the view that the market’s short-term outlook remains weak, but a fresh selloff is possible only if the level of 24,330/79700 is breached. On the other hand, above 24,550/80500, the pullback rally could continue up to the 20-day SMA (Simple Moving Average) or 24,700/81000 and 24,800/81300,” said Amol Athawale, VP (technical research), Kotak Securities.Among sectors, the capital market index lost the most, declining by 7.5 percent, whereas some buying was seen in selective Fast Moving Consumer Goods (FMCG) stocks, resulting in the FMCG Index gaining 0.67 percent.According to Pabari, if the new tariffs remain in place for a year, they could shave off 60–80 basis points (bps) from India’s GDP growth. But the immediate and sharper concern lies in the risk of a widening trade deficit.The Reserve Bank of India (RBI) has projected the real gross domestic product (GDP) at 6.5 per cent in FY2026. Many economists have estimated India’s GDP to fall below 6 per cent due to the levy of higher tariffs.