Rupee will fall marginally against the dollar in the year 2025- Report
Delhi Delhi: The Indian rupee (INR) is expected to depreciate marginally in 2025, mainly due to continued volatility in foreign portfolio investor (FPI) flows and a likely strengthening of the US dollar, according to a Bank of Baroda report.The Indian rupee (INR/RS) depreciated 2.8 per cent in 2024 but still outperformed many of its peers. The Reserve Bank of India (RBI) has actively intervened in the foreign exchange market to manage currency fluctuations.
India’s foreign exchange reserves stood at US$644.3 billion as of December 20, 2024, reflecting stable current account dynamics and low oil prices, which supported the rupee. Equity markets have seen a slight correction in recent times, but analysts are optimistic about the performance of indices in early 2025, buoyed by expectations of earnings recovery. This recovery is expected to be driven by a rise in rural spending and a rise in government expenditure, which could provide strong tailwinds for the markets.
Both the Sensex and Nifty 50 have performed remarkably well in CY24, rising 8.7 per cent and 9 per cent, respectively. Notably, the Sensex hit an all-time high this year, crossing the 85,500 mark, underlining investor confidence. Real estate, consumer durables and IT sectors have been the best performers, leading to significant gains for investors.Globally, equity indices also closed CY24 on a high note, with a broad-based rally across major markets. In the United States, the S&P 500 and Dow Jones recorded double-digit annual gains.
However, some uncertainty remains as investors await policy direction under President-elect Trump, which could introduce new risks.The bond market outlook for 2025 remains shrouded in uncertainty, particularly on account of potential inflationary pressures emanating from the policies of the incoming Trump administration.U.S. Treasury yields ended 2024 with a modest gain of 69 basis points, climbing above the 4.5 percent mark. Yields fluctuated throughout the year due to mixed economic cues, although they remained elevated, indicating that inflation risks remain.
The Federal Reserve begins a monetary easing cycle in September 2024, cutting rates for the first time in three years. However, the Fed has ruled out further rate cuts for the year 2025, with only two additional cuts expected, leaving the federal funds rate in a range of 3.75 percent-4 percent. This cautious outlook underscores ongoing concerns about inflation and economic stability.
