Moneycontrol Pro Panorama | The final countdown

The RBI is not only the biggest trader in forex, but it would be a big buyer in the bond market too.

Dear Reader,

The year is almost winding to a close and nostalgic wraps and futuristic outlooks have risen to a frenzy (we bring you some last-minute ones in our Reading List today). It is after all the final countdown, where we compare what we set out to achieve with what we actually did.

US President Donald Trump has certainly achieved his goals. Trump had set out to levy tariffs on trading partners and kick immigrants out of America. The promise of tariffs has rung true albeit whittled down in many cases due to Trump’s trademark penchant for striking deals. Even as the US government hunted down undocumented immigrants, it tightened the rules for getting American citizenship and work visas, the latest being the H1B visa rules.

In short, Trump has delivered his promise of making America more American although the impact of these on the economy is still being debated. The fact that the US economy grew by 4.3 percent in the third quarter has only strengthened the case for the Trump administration. For the rest of the world though, 2025 was disconcerting if not turbulent. As American exceptionalism was contested, it only made investors dig deeper into a bubbling stock market. Amid rising concerns over a bubble in Artificial Intelligence, the S&P 500 has soared, and dollars have returned to US markets in double speed. That has meant that emerging markets have buckled. India somehow has escaped with just bruises as domestic investors put their faith in the economy and corporate earnings.

The year may have started as one made for equities, but it is winding down with the foreign exchange market at the centre of attention. Here, the Indian rupee has taken the dubious distinction of being the worst performing currency in emerging market exchange rates. Indeed, when the dollar’s hegemony was being threatened, investors resorted to buying gold (just like central bankers), other riskier assets and even select emerging market currencies.

For the rupee though, the year has been one of a series of unfortunate events. Despite a strong economic growth and low inflation, the rupee declined to hit all-time lows and smash through critical psychological floors. Tariffs ate into exports, H1B visa tightening is threatening the Indian dream of making it big abroad and foreign investors aren’t interested in rupee assets beyond mere lip service. Dollars have persistently flown out and the Reserve Bank of India has had to make good this loss by being the biggest dollar seller in the market for many months. Its actions this year may influence the central bank’s approach next year too as we explained in this piece.

The RBI is not only the biggest trader in forex, but it would be a big buyer in the bond market too. The RBI has announced a fresh set of bond buying earlier this week. Our Chart of the Day highlights the fact that government bond purchases by the RBI under open market operations would be historically high in fiscal 2026. At the start of 2025, the RBI had indicated that it would leave markets alone unless there is high volatility which requires intervention. By the year end, global volatility has forced the hand of the central bank, making it become a regular presence in both forex and the bond market.

As the year comes to a close, the RBI may have diluted its stance of low intervention, but it has largely achieved its objectives of financial stability, keeping inflation low and liquidity in surplus. That said, central bank intervention is not without costs and distortions and investors will have to watch for these in the new year.

Some incomplete tasks remain. The Indian government is yet to successfully strike a trade deal with the US on tariffs. The RBI may have had tremendous success in keeping inflation low, but a lot of price stability is subject to vagaries of food supply. The banking sector is in the pink of its health, but credit growth is yet to meaningfully revive which is expected in the new year. Here, the stress that the microfinance sector witnessed this year has now come to pass. But will the sector show strength in 2026? Dinesh Unnikrishnan explains what awaits the microfinance sector in his piece here.

Finally, for investors the challenge to choose assets that have a healthy balance of risk and return remains. 2025 was a year of uncertainty and the next year may not be very different.

Investing insights from our research team

Weekly Tactical Pick: Why should u check into this hotel stock?

Where is the value for investors in consumer tech?

What else are we reading?

Will India's microfinance sector return to high growth in 2026?

Can Indian boardrooms close the empathy deficit after 2025’s brutal layoffs

Suzlon, Inox: Waiting for the wind to turn

Start-up Street: In 2026, roadblocks are many, as are opportunities

Chart of the Day: Why RBI’s bond purchases would be historically high in FY26

A billion unserved consumers that can help rescue exporters hit by tariffs

AI upheaval shows little sign of lessening (republished from the FT)

AI in Education: Why rural and Tier-3 India risks being left behind

Supreme Court in 2025: A significant year for the Indian judiciary

The global AI Race and India’s regulatory dilemma

Constitutional overreach of India’s new higher education bill

RSS Redefines Hindutva: A living, inclusive civilisational idea

Tech and Startups

2025 was the year real-money gaming died in India. What next?

Markets

Sensex at 40: Big drawdowns, faster recoveries and an index that offers stability despite constant churn

Technical Picks: Tata Power, IRCTC, Dr. Reddy's Lab, BHEL, SBI

Aparna Iyer

Moneycontrol Pro