Rupee's Outlook in 2025

The Indian Rupee is anticipated to experience a marginal depreciation against the US Dollar in 2025, influenced by volatile foreign portfolio investor (FPI) flows and a potentially stronger US dollar, according to a Bank of Baroda report. Despite a 2.8% depreciation in 2024, the INR outperformed several global currencies, thanks to the Reserve Bank of India's (RBI) active forex market interventions aimed at managing fluctuations.

Equity Markets Poised for a Strong Start

Equity markets, despite a minor correction in recent days, are expected to rebound in early 2025. This optimism is attributed to anticipated growth in rural spending and increased government expenditure, which are projected to fuel corporate earnings. In 2024, the Sensex and Nifty 50 delivered strong performances, with the Sensex crossing the historic 85,500 mark, reflecting strong investor confidence.

Global Equity Markets and Fiscal Prudence

Global equity markets concluded 2024 on a positive note, with the S&P 500 and Dow Jones in the US reporting double-digit gains. However, market participants remain cautious as they await the policy agenda of President-elect Donald Trump. The Indian government remains committed to fiscal prudence, targeting a fiscal deficit of 4.9% of GDP and a gross borrowing target of Rs 14 trillion for FY25. The RBI, which has kept rates steady at 6.5% since February 2023, is expected to consider a rate cut in its February 2025 policy meeting to support economic growth.