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RBI missing as Rupee crashes below 89
Bagga called the rupee’s steep fall “a very significant issue,” noting that 89 was a critical psychological level that the RBI was widely expected to defend.
He added that the unusual currency move suggests heavy FPI selling or possible unwinding of Japanese carry trades, especially after Japan’s inflation spike raised the chances of a December rate hike.
A weak rupee, combined with India’s FPI taxation and global uncertainty, makes the market less appealing for foreign investors, he warned.
Rate cuts now unlikely
Bagga said the currency slump reduces the probability of a December RBI rate cut, as the central bank will avoid adding further pressure on the rupee. He also flagged risks of imported inflation rising if the currency remains unstable.
US–India trade deal still the biggest trigger
Bagga believes a breakthrough in the US–India trade deal could deliver a strong market rally. He also highlighted concerns that India was “singled out” on the punitive 25% tariff despite reducing Russian oil purchases.
A resolution, he said, would especially help exporters who have already missed the Christmas season due to delays.
Tax cuts, fiscal push needed to boost growth
He reiterated that:
India needs fiscal stimulusRBI must eventually cut ratesWealth-creating sectors are currently overtaxedPrivate-sector banks remain a key opportunity, but credit growth depends on corporate capex revivalPrivate Banks Remain Attractive
Bagga remains bullish on private-sector banks, noting strong balance sheets and adequate capital buffers. However, a pick-up in corporate lending is crucial to revive broader growth momentum.
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