The depreciation in the Indian rupee is likely to continue towards 77 per US dollar levels as the novel coronavirus pandemic shows no signs of easing across the world.

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The rupee has depreciated 2 percent so far in April, breaching a record low of 76.87 per US dollar on April 16, as coronavirus concerns continue to dampen investor sentiment in the forex market.

Persistent selling by foreign institutional investors (FII) have been a cause of worry for domestic currency and overseas investors have pulled out Rs 1,20,408 crore from Indian markets so far in 2020, according to NSDL data. This has led to a depreciation of around 7 percent in the rupee this year.

"Economic implications of the COVID19, external refinancing needs and wider fiscal deficit may impact the carry trade. Risk on sentiments in global markets have found a footing over the past few weeks, given the monetary and fiscal policy response by the global central banks," said Vinod Sharma, Head - PCG & Capital Market Strategy, HDFC Securities.

Cental banks and governments around the globe have stepped ahead to calm the financial markets by delivering massive amounts of quantitative easing and fiscal easing through conventional and unconventional measures.

Last week, the Reserve Bank of India Governor Shaktikanta Das announced a series of steps to help revive the Indian economy, including cutting its reverse repo rate by 25 basis points to 3.75 percent and launching targeted long-term repo operations (TLTROs) worth Rs 50,000 crore to help non-banking financial companies.

"RBI has already done the Forex swap of $2 billion in March along with the rate cut to support the economy. Going forward, the announcement of new swap window with foreign nations and central bank intervention will prevent further weakness," Sharma added.

Moreover, expectations of no major rebound in crude oil prices is likely to arrest the downfall in the local currency.

“Lower risk appetite will continue to pressurize currencies of the emerging markets. Locally, attention remains focused on the number of COVID-19 cases and a timetable for the easing of lockdown restrictions that were recently extended. Also, social unrest concerns are elevated. So we cannot rule out the fact that worst is yet to come for India in all likelihood,” said Rahul Gupta, head of research-currency, Emkay Global Financial Services.

Experts are of the view that lower crude oil prices, peaking of COVID19 cases and foreign fund inflows will support the rupee, going ahead.

"With a stronger tone in risk markets, we expect rupee to remain relatively stable going forward," Sharma said.

As the economy gets back on track, analysts expect foreign funds to flow in Indian markets.

“Thus, unless the immediate support of 76 in USD/INR spot doesn’t break and it trades below that for considerable amount of time, we expect the spot to remain bullish towards 77 zone,” Gupta added.