rewrite this title and make it good for SEORupee breaches 89, FPI sentiment hit: Ajay Bagga warns of volatile days ahead

India’s equity markets remain close to record highs, but the sudden crash in the rupee and sharp global volatility have raised red flags for investors, says market expert Ajay Bagga. Despite strong AI-led optimism in global markets early Thursday, US indices reversed sharply, and the ripple effect spilled into Asia.

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.