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Informist, Wednesday, Dec. 10, 2025

 

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--Kotak Securities: Do not expect US inflation reaching 2% target soon 
--Kotak Securities: US bond yld may fall to 3% if US cuts rates aggressively 
--Kotak Securities: See rupee at 92-93 per dollar in Jan-Jun 
--Kotak Securities: See rupee around 88 per dollar in Jul-Dec 2026 
--Kotak Securities: Real GDP growth strong, Q3 GDP to benefit from GST cuts 
--Kotak Securities: Oct-Dec GDP growth expected at 7.8-8% 
--Kotak Securities: See FY26 real GDP growth at 7.8%, FY27 at 6.5% 
--Kotak Securities: See FY26 nominal GDP growth at 8.8%, FY27 at 9.9% 
 

 

MUMBAI – The Indian rupee is expected to depreciate further and reach 92-93 against the dollar in the first half of 2026, Kotak Securities said. However, the domestic currency might rise to around 88 per dollar in the second half, the brokerage said in its 2026 market outlook. The domestic currency crossed the 90-per-dollar mark last week and closed at 89.96 on Wednesday. 

 

The rupee's fall to its lifetime low was driven by robust dollar demand from importers and foreign portfolio investors. The expected inflows from foreign portfolio investors are likely to support the rupee, Anindya Banerjee, senior vice president for commodity derivatives at the brokerage, said. 

 

The brokerage also said that the US long-term yields are likely to remain elevated as fiscal pressures intensify. If US interest rates are aggressively reduced, the broking firm expects US bond yields to fall to around 3% from the current 4% level. US Treasury yields have remained range-bound, constrained by opposing forces such as persistent inflation and weakening labour-market conditions, it said.

 

The US Federal Reserve is scheduled to announce its monetary policy decision at 0030 IST Thursday. There is a 90% probability that the Fed will reduce the key rate by 25 basis points to 3.50-3.75%, according to the CME FedWatch Tool. "Even as the US Fed has cut rates by 75 bps in the current rate-cutting cycle, the inflation there remains well above the 2% target," Kotak Securities said.

 

The broking firm does not expect US inflation to ease to the Fed's 2% target anytime soon. Upward pressure on US inflation is likely to persist due to the gradual pass-through of import tariffs into consumer prices and the dollar's weakness, which raises the cost of US imports, it said. 

 

ECONOMY

The brokerage expects the government's goods and services tax cuts and the festive season to drive India's real GDP growth in the December quarter to 7.8-8.0%. However, the high real GDP figures are unlikely to sustain and should moderate as the effects of a benign deflator wane, it said. Real GDP growth is seen at 7.8% in FY26, before moderating to 6.5% in FY27. Growth is likely to moderate next year, as a higher deflator is expected to offset gains from stronger nominal GDP growth. At the same time, favourable fiscal and monetary settings are likely to help sustain overall momentum, it added. Nominal GDP growth is seen at 8.8% in FY26 and 9.9% in FY27, the brokerage said. 

 

Kotak Securities expects the country's CPI inflation to average 2.1% in FY26 and core inflation to average 4.3%. "Inflation may head back to around 4% by early FY27 as the recent decline in inflation has largely been led by a sharp decline in food and vegetable prices." India's CPI inflation fell to a record 0.25% in October, driven by lower food prices and GST rate cuts. 

 

The Reserve Bank of India has reduced the policy rate by 125 basis points so far in 2025, bringing it to 5.25%. These cuts were driven by the central bank's expectation that inflation will remain moderate in FY26, alongside its intent to support economic growth, Kotak Securities said. The brokerage believes there is room for another 25-bps cut at the RBI's February meeting. "The RBI's policy communication has been notably dovish, reflecting confidence that inflation will remain contained."  End

 

US$1 = INR 89.97

 

Reported by Anjana Therese Antony and J. Navya Sruthi

Edited by Saji George Titus

 

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