Rupee crosses 90-mark: RBI rate cut next? Aditya Pagaria explains
While his desk expects a 25 basis point cut, Pagaria emphasised that the market’s reaction will hinge less on the rate action and more on the tone of the RBI governor.
- Dec 4, 2025,
- Updated Dec 4, 2025 1:46 PM IST
The Indian currency markets are witnessing a paradoxical scenario. On one hand, the GDP growth has clocked a robust six-quarter high, yet the rupee is grappling with a historic depreciation against the greenback.
Against this backdrop of a falling rupee and impending central bank policy decisions, Aditya Pagaria, Senior Fixed Income Fund Manager at Axis Asset Management Company, weighed in on the macro headwinds.
Speaking to Business Today, Pagaria said the 90-mark was widely seen by market participants as a level the RBI might defend. He pointed to the continuous trade delays with the US and a strengthening dollar as key triggers. While the rupee has broken the headline number, Pagaria believes the slide may be limited in the near term. "We think that this dollar-rupee should depreciate maybe 50 paisa or something more, not more in next few days or so," he added, noting that the upcoming RBI policy on Friday remains the major cue.
While the GDP print surprised the street on the upside, Pagaria advised looking beyond the headline number. He attributed the surge partly to the ‘base effect’ compared to the lower print of 5.8 per cent in the same quarter last year.
Furthermore, Pagaria highlighted a pre-GST tactical shift. "Before the GST cuts came into play, there was stacking of inventory across the markets and because of that, the GDP number would have come higher," Pagaria said.
Addressing the liquidity situation, Pagaria credited the central bank for doing a ‘fantastic job’ over the last six months through OMOs, CRR cuts, and FX swaps. Currently, core liquidity stands at a comfortable Rs 4 lakh crore. However, he warned of a potential squeeze in the January-March quarter due to seasonal currency circulation outflows and RBI's FX interventions.
"We expect around 1.75 to 2 lakh crores of incremental CIC (Currency in Circulation) moving out from the banking industry," he projected.
With inflation prints trending lower—and essentially bordering on deflationary numbers—the market is rife with speculation about Friday’s policy. However, the plunging rupee complicates the equation.
"It is a very 50-50 situation on what the RBI will do," Pagaria said. While his desk expects a 25 basis point cut, Pagaria emphasised that the market’s reaction will hinge less on the rate action and more on the tone of the RBI governor.
"More than rate cut, it is more on the commentary... whether that commentary would be dovish or RBI, if it signals a very hawkish commentary after the rate cut, then it will obviously be a bad experience," he said, drawing a parallel to the June policy where a rate cut accompanied by hawkish signals spooked the market.
The Indian currency markets are witnessing a paradoxical scenario. On one hand, the GDP growth has clocked a robust six-quarter high, yet the rupee is grappling with a historic depreciation against the greenback.
Against this backdrop of a falling rupee and impending central bank policy decisions, Aditya Pagaria, Senior Fixed Income Fund Manager at Axis Asset Management Company, weighed in on the macro headwinds.
Speaking to Business Today, Pagaria said the 90-mark was widely seen by market participants as a level the RBI might defend. He pointed to the continuous trade delays with the US and a strengthening dollar as key triggers. While the rupee has broken the headline number, Pagaria believes the slide may be limited in the near term. "We think that this dollar-rupee should depreciate maybe 50 paisa or something more, not more in next few days or so," he added, noting that the upcoming RBI policy on Friday remains the major cue.
While the GDP print surprised the street on the upside, Pagaria advised looking beyond the headline number. He attributed the surge partly to the ‘base effect’ compared to the lower print of 5.8 per cent in the same quarter last year.
Furthermore, Pagaria highlighted a pre-GST tactical shift. "Before the GST cuts came into play, there was stacking of inventory across the markets and because of that, the GDP number would have come higher," Pagaria said.
Addressing the liquidity situation, Pagaria credited the central bank for doing a ‘fantastic job’ over the last six months through OMOs, CRR cuts, and FX swaps. Currently, core liquidity stands at a comfortable Rs 4 lakh crore. However, he warned of a potential squeeze in the January-March quarter due to seasonal currency circulation outflows and RBI's FX interventions.
"We expect around 1.75 to 2 lakh crores of incremental CIC (Currency in Circulation) moving out from the banking industry," he projected.
With inflation prints trending lower—and essentially bordering on deflationary numbers—the market is rife with speculation about Friday’s policy. However, the plunging rupee complicates the equation.
"It is a very 50-50 situation on what the RBI will do," Pagaria said. While his desk expects a 25 basis point cut, Pagaria emphasised that the market’s reaction will hinge less on the rate action and more on the tone of the RBI governor.
"More than rate cut, it is more on the commentary... whether that commentary would be dovish or RBI, if it signals a very hawkish commentary after the rate cut, then it will obviously be a bad experience," he said, drawing a parallel to the June policy where a rate cut accompanied by hawkish signals spooked the market.