2 weeks Ago By Neha Aravind
The outlook for the Indian rupee remains a concern in 2025 as a potential depreciation can have significant repercussions for the economy, according to Manish Sonthalia, chief investment officer of Emkay Investment Managers. The comments come after the Indian currency depreciated 2.88% against the US dollar last year.
On Dec. 27, the rupee witnessed its worst single-day fall in over two years when it touched a record low of 85.82 against the greenback.
Sonthalia said the rupee's potential depreciation was a key factor that could influence India's inflationary environment. "If you have a rupee depreciating, then the environment in India is going to be inflationary, and that's going to be a headwind for rate cuts." While the markets are currently anticipating rate cuts by the Reserve Bank of India in the first quarter of 2025, the situation can change depending on the rupee's performance, the Emkay CIO said.
"The markets would love growth over inflation. That's the conundrum," Sonthalia said, highlighting the dilemma faced by the RBI in balancing inflation control with growth. He explained that while inflation is currently "under control", external factors like oil prices and the rupee’s depreciation could lead to imported inflation, complicating matters further.
Sonthalia pointed to sectors like pharmaceuticals, information technology and banking as likely beneficiaries of a weaker rupee. "The big theme for at least the first half of fiscal 2026 is going to be your rupee depreciation," he said, adding that the depreciation could help sectors benefiting from exports or those with foreign-currency revenue streams. Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit.
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