Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, expects the US Dollar Index (DXY) to gradually weaken over the next few quarters. “As the Federal Reserve moves closer to its rate-cutting cycle, real yields in the US may decline, eroding the dollar's carry advantage,” she said in an interview with Moneycontrol.
The DXY has already eased from recent highs, reflecting the narrowing gap in growth and interest rates between the US and other developed markets.
Srivastava also sees the Nifty hitting a record high in the second half of 2025, backed by falling interest rates, low inflation, and better earnings visibility.
On the upcoming RBI policy meeting later this week, she believes June’s meeting is a strong candidate for the next cut, and if inflation remains anchored, a follow-up cut before year-end is likely. "The key risk to this path is a sudden resurgence in oil or food inflation, or a shift in global central bank stances, especially the Fed," said the Founder & Fund Manager at Wright Research PMS.
Do you see real GDP growth at 6.5 percent in FY25 and FY26?
Yes, India’s real GDP growth at 6.5 percent in both FY25 and FY26 is achievable, but with increasing headwinds. On the positive side, India’s structural growth story remains intact, driven by formalisation, digital infrastructure, capex push, and a relatively young population. Even amid global slowdown concerns, India continues to outperform emerging market peers. The government's consistent focus on fiscal consolidation without derailing capital expenditure provides a credible macro backdrop.
However, recent high-frequency indicators signal moderation. There are clear signs of demand fatigue — slowing credit growth, muted auto and real estate sales, and weaker wage momentum. Household consumption recovery has been uneven, and the rural sector remains under strain due to weather variability and input cost pressures. The industrial production and exports outlook also faces headwinds amid global uncertainties, especially with the Eurozone and China slowing down.
Yet, macro buffers remain strong. Inflation has eased meaningfully — headline CPI was at 3.2 percent YoY in April, giving the RBI room to support growth through policy easing. With external balances stable, a mild monetary stimulus and a pickup in private capex could cushion the downside and sustain growth in the 6–6.5 percent corridor. The risks to this outlook include global financial tightening, oil price shocks, and any disruption to the monsoon.
In short, 6.5 percent is feasible, but policymakers will need to walk a fine line between supporting growth and ensuring macro stability.
Do you expect the market to be at record high levels in the second half of the current calendar year, and to end the year with 12–15 percent returns?
A record high in H2 CY25 is likely, supported by a trifecta of falling interest rates, benign inflation, and improving earnings visibility. The Indian market has been resilient despite multiple global risks, be it US yield volatility, oil price spikes, or geopolitical concerns. That speaks to the underlying strength of India's growth narrative.
Valuations are elevated but not stretched, especially outside the mega-cap space. With the RBI expected to ease rates further and liquidity turning more accommodative, domestic institutional flows should remain strong. A broader market rally may unfold as mid- and small-caps catch up.
Earnings remain a key driver. The market expects double-digit earnings growth in FY26, with banks, capital goods, and discretionary sectors leading. If execution holds and global macro stabilises, equities can deliver 12–15 percent returns in 2025, especially if political continuity post-elections boosts confidence.
However, return expectations must be tempered by volatility, due to global monetary policy divergence, any hard landing fears in the US, or sharp swings in crude or currency. The quality of the rally, i.e., broad-based versus narrow, will be just as important as the headline numbers.
Do you think the RBI will deliver two rate cuts in the remaining part of 2025, including the June policy meeting?
Yes, we believe the RBI will cut rates twice more in 2025, including in the June meeting. Inflation is firmly under control with headline CPI trending below 4 percent on a three-month moving average basis. Core inflation, excluding volatile items, has also softened. More importantly, economic momentum is slowing. As per Nuvama’s policy preview, high-frequency indicators, from auto sales to credit growth, have weakened, while fiscal policy remains non-expansionary.
The Balance of Payment has turned benign, with the INR showing stability and the US dollar weakening, reducing external risk pressure. Liquidity in the banking system is ample, giving RBI comfort to ease without threatening macro stability. With policy rates at 6.5 percent, the scope exists to ease towards 5.5 percent–5.25 percent over the cycle.
June’s meeting is a strong candidate for the next cut, and if inflation remains anchored, a follow-up cut before year-end is likely. The key risk to this path is a sudden resurgence in oil or food inflation, or a shift in global central bank stances, especially the Fed.
Do you expect further weakness in the US Dollar Index from here on?
Yes, we expect the US Dollar Index (DXY) to gradually weaken over the next few quarters. The DXY has already come off its recent highs, reflecting a narrowing growth and rate differential between the US and other developed markets. As the Fed moves closer to its own rate-cutting cycle, real yields in the US may decline, eroding the dollar's carry advantage.
The market is already pricing in one to two Fed rate cuts in H2 2025, especially if US inflation continues to cool and growth slows. Meanwhile, other currencies — especially those from emerging markets like India, stand to benefit from stable capital inflows and improving macro fundamentals.
Moreover, global central banks — from the ECB to the BoE — are on the cusp of rate cuts, but their tightening cycles started later and ended with less aggressive hikes, leaving room for their currencies to recover. The weakening of the dollar may not be dramatic but should trend lower, particularly if geopolitical risks remain contained and global trade stabilises.
Still, volatility in DXY will be event-driven — influenced by US fiscal risks, trade tensions, and election-related policy noise.
Do you believe that US tariff rates will not go below 10 percent?
It is unlikely that the average US tariff rates will fall below 10 percent in the near term, especially in a increasingly protectionist global environment. The US-China strategic rivalry has hardened into a long-term economic competition, and tariffs have now become part of industrial policy, not just trade leverage.
Both political parties in the US are now espousing more nationalistic trade policies — favouring domestic manufacturing, reshoring supply chains, and safeguarding strategic sectors like semiconductors, EVs, and green tech. Even with WTO norms under pressure, tariffs are being used not just against China but selectively expanded to other countries under industrial or security pretexts.
Given this backdrop, any rollback of tariffs appears politically difficult. Instead, we may see a reconfiguration — higher levies on targeted sectors, while low-value trade may still flow. For India, the implication is to deepen bilateral FTAs and integrate better into supply chains that bypass China.
Are you positive on the financials, industrials, and consumer discretionary sectors?
Yes, these three sectors represent core allocations in our portfolios at Wright Research, and we are structurally positive on them.
Financials continue to demonstrate healthy credit growth, improving asset quality, and strong earnings leverage in a falling rate environment. Private sector banks and select NBFCs stand to gain from policy easing and recovering capex.
Industrials benefit from both public and private capex momentum. Though near-term demand may be soft, the multi-year infrastructure cycle remains intact, spanning railways, defense, energy transition, and manufacturing PLI-linked investments. The margin outlook is also improving as commodity prices remain stable.
Consumer discretionary is more nuanced. Urban demand is healthy, and categories like automobiles, travel, and premium consumption are doing well. Rural and low-end consumption still lags but should improve with easing inflation and government support. Rate cuts will support financing-intensive segments like two-wheelers, white goods, and housing-related spends.
Together, these sectors align well with India’s macro narrative of formalisation, infrastructure push, and rising affluence, making them natural beneficiaries of both policy and market flows.
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