The Indian rupee is set to face sharp and persistent volatility through 2026 as capital outflows, tariff-related trade disruptions and weak foreign investment flows continue to outweigh the country’s strong macroeconomic fundamentals, analysts and official data indicate, PTI reported.Despite steady growth and moderate inflation at home, the currency is unlikely to find a durable floor until uncertainty around tariffs eases, with market participants cautioning that a trade agreement with the US, while helpful, may not be sufficient on its own to stabilise the rupee.The rupee has weakened nearly 5% since crossing the 85-per-dollar level in January and has slipped past the historic low of 91 against the US dollar. Over the year, it has depreciated more than 19% against the euro, about 14% versus the British pound and over 5% against the Japanese yen, making it the worst-performing currency among Asian peers even as the dollar index fell over 10% and global crude oil prices remained weak.The slide accelerated after sweeping reciprocal tariffs announced by US President Donald Trump in April triggered sustained foreign portfolio outflows, as global investors shifted capital to other emerging markets offering better risk-adjusted returns.The pressure is evident in investment flows. On a net basis, foreign direct investment between January and October this year turned negative, while total investment inflows declined to minus $0.010 billion during the period, compared with inflows of $23 billion in the year-ago period. Net FDI stood at $6.567 billion, while net portfolio investment remained negative at minus $6.575 billion.“FDI acts as the anchor flow for the balance of payments. When that anchor weakens, the currency becomes more dependent on portfolio flows; forex markets turn more sensitive to global risk sentiment; and central bank intervention requirements increase,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities, PTI quoted.The rupee’s fall gathered pace in the last quarter of the year. It dropped more than 1% in a single session on November 21 to 89.66 per dollar, breached the 90 level on December 2 and crossed the 91 mark on December 16.The government has attributed the depreciation to a widening trade deficit and delays in finalising a trade pact with the US amid weak support from the capital account. Minister of state for finance Pankaj Chaudhary told the Rajya Sabha on December 16 that the rupee’s slide had been influenced by the increase in the trade gap and developments related to the India-US trade agreement.RBI governor Sanjay Malhotra has said the central bank does not target any specific exchange rate level, while analysts note that recent rate cuts aimed at supporting domestic growth have reduced the rupee’s relative attractiveness.Dilip Parmar, research analyst at HDFC Securities, described the situation as a capital account-driven crisis, noting that shrinking inflows, rather than trade alone, are driving the decline. The RBI has also shifted towards a more flexible exchange rate regime, which the IMF classifies as a “crawl-like” arrangement.The depletion in net foreign investment inflows has further amplified volatility. “A sharp decline in FDI has reduced long-term dollar inflows, making the rupee more dependent on volatile portfolio flows,” said Jateen Trivedi, VP research analyst, commodity and currency, LKP Securities, PTI quoted.“Higher commodity prices and elevated risk on US trade deals kept FDI away and impacted the rupee majority due to lack of intent in inflows and going elsewhere, which are our competitors,” Trivedi added.RBI data also shows a depletion of $10.9 billion in foreign exchange reserves during July–September FY26, compared with an accretion of $18.6 billion in the same period a year earlier. The record $17.5-billion exit by foreign institutional investors in 2025 has added to dollar demand, intensifying pressure on the rupee.Analysts expect the current account deficit to widen to around 2% or more in 2026 as the full impact of US penalty tariffs feeds into exports, increasing structural demand for dollars. “A trade pact with the US would help, but it is not a silver bullet,” Banerjee said.Despite near-term stress, analysts say India’s growth trajectory and inflation profile provide a long-term anchor for the currency. Banerjee expects the rupee to test the 92–93 levels amid global volatility over the next three to four months, before potentially entering a phase of appreciation from April as capital flows realign and dollar weakness becomes more evident, with levels of 83–84 seen by the end of FY27.

Stock prices in London closed in the red on Wednesday at the end of a shortened trading day, but the FTSE 100 index ended the year close to a new record despite a slight retreat on Wednesday.

The FTSE 100 index closed down 17.65 points, 0.2%, at 9,923.06. The FTSE 250 index ended down 75.93 points, 0.3%, at 22,482.43, and the AIM All-Share index closed down 1.07 points, 0.1%, at 765.89.

The FTSE 100 has registered a 22% gain over the course of 2025, ahead of the FTSE 250 index, which has climbed 9.0% and the AIM All-Share index, which has risen 6.4%.

In European equities on Wednesday, the CAC 40 in Paris closed down 0.5% after a shortened day of trading. The DAX 40 is closed. Financial markets in Paris and Frankfurt will be closed on Thursday for the New Year holiday, before reopening on Friday.

During 2025, the CAC 40 has climbed 10% while the DAX 40 is up 22%.

The pound was quoted at 1.3463 dollars at the time of the London equities close on Wednesday, down from 1.3475 dollars at Tuesday’s close. The euro was lower at 1.1754 dollars from 1.1762 dollars. Against the yen, the dollar was trading at 156.62 yen, up from 156.25 yen.

Stocks in New York were called lower. The Dow Jones Industrial Average and S&P 500 were called down 0.1%, while the Nasdaq Composite was called down 0.2%.

The yield on the US 10-year Treasury was quoted at 4.11% on Wednesday, narrowed slightly from 4.12% on Tuesday. The yield on the US 30-year Treasury was unchanged at 4.80%.

Miners have had a strong year on the FTSE 100 index, as Fresnillo shares have more than quintupled amid a rally in precious metal prices. Peers Endeavour Mining and Antofagasta have more than doubled over the course of 2025.

Elsewhere, shares in Babcock and Rolls-Royce have roughly doubled, while BAE Systems has shot up around 49%, in a largely strong 2025 for the aerospace and defence sector.

It has also been a strong year for some high street banking names, with Lloyds Banking Group adding around 79%, Barclays some 78% and NatWest 62%. Asia-focused Standard Chartered and HSBC have risen 84% and 50%, respectively.

Not faring as well, brewer Diageo has shed around 37% in 2025, while distribution and services firm Bunzl has also dropped 37%.

Advertising firm WPP would have been the worst FTSE 100-listed performer, slumping around 59%, were it not for its relegation from the index earlier this month.

Elsewhere among mid-caps, travel retail company WH Smith dropped 46% this year, with the bulk of that plunge coming from a single trading day in August, when an investigation found profit had been overstated in its North American division.

On AIM, financial technology provider Fiinu is the leading light, with shares closing at 8.48p on Wednesday, having ended last year at 0.5p.

In London on Wednesday, miners weakened after strong gains on Tuesday, with Fresnillo down 2.3% and Endeavour Mining 0.8% lower.

Elsewhere, among mid-caps, Senior shares climbed 0.5% as it prepared to start a £40 million share buyback programme after it completed the sale of its Aerostructures business to Sullivan Street Partners.

The disposal of the division to the London-based mid-market buyout firm was first announced back in July.

Senior will receive an initial £150 million consideration, with the remaining £50 million expected in the first half of 2026, depending on the 2025 earnings performance of Aerostructures.

Senior says it will use the initial cash proceeds to reduce debt and to fund the share buyback. This is expected to start following the release of the company’s annual results on March 2.

Princes Group shares closed down 1.2% as it said its parent company NewPrinces Spa has completed the acquisition of Plasmon Srl from Kraft Heinz Co for 124.3 million euros in cash.

The Liverpool, England-based food and beverage firm said Plasmon is a newly established company, which owns the business related to the manufacturing, packaging, marketing, selling and distribution of baby food and speciality nutrition food products.

This includes the number one baby food brand in Italy, Plasmon, as well as other brands including Nipiol, BiAglut, Aproten and Dieterba.

Princes said subsidiary Princes Italia Spa has entered an operating asset lease agreement with Plasmon, which will take effect on Thursday.

Under the terms of the lease, all operations related to the Plasmon business will be carried out by Princes Italia.

On the AIM market, MobilityOne shares more than doubled as it said its Malaysia subsidiary has received conditional approval from Labuan’s financial services authority to establish an additional subsidiary to carry on its Islamic digital banking business.

The Kuala Lumpur-based e-commerce payment solutions provider said its wholly-owned subsidiary, MobilityOne Sdn Bhd, also known as M1 Malaysia, will establish a subsidiary in Labuan to be named MBO Bank (Labuan) Ltd.

MobilityOne said the purpose of MBO Bank is to offer a “full suite of offshore financial services” through a Shariah-compliant platform to international clients, under the Labuan Financial Services Authority regulatory framework.

Due to the preparatory work required to meet the conditions of Labuan FSA approval, MobilityOne said it does not anticipate recording any revenue or earnings from the Islamic digital banking business in 2026.

Brent oil was slightly higher at 61.56 dollars a barrel at the time of the London equities close on Wednesday, from 61.44 dollars late on Tuesday.

Gold was lower at 4,315.00 dollars an ounce at Wednesday’s close, against 4,366.20 dollars on Tuesday.

The biggest risers on the FTSE 100 were Pershing Square, up 52p at 4,846p; Anglo American, up 29p at 3,085p; Marks & Spencer, up 2.5p at 330p; British Land, up 2.4p at 403.8p; and 3i Group, up 19p at 3,263p.

The biggest fallers on the FTSE 100 were Fresnillo, down 78p at 3,334p; Croda International, down 61p at 2,695p; Beazley, down 12p at 832p; Experian, down 46p at 3,363p; and Diploma, down 60p at 5,295p.

There are no local corporate events scheduled for the remainder of the holiday-shortened week.

When the market reopens on Friday, there will be swathe of manufacturing PMI readings across the globe.

Contributed by Alliance News.

New Delhi: India’s fiscal deficit in the first eight months (April-November) of the financial year 2025-26 was estimated at Rs 9.8 lakh crore, or 62.3 per cent of the budget estimate for the full financial year, data released by the Controller General of Accounts on Wednesday showed. 

The data showed that the government has stepped up its capital expenditure on big-ticket infrastructure projects such as highways, ports, and railways to spur growth and create more jobs in the economy. Capital spending touched 58.7 per cent of the full-year target, significantly higher than 46.2 per cent in the corresponding period last year. There was a 28 per cent increase in the government’s capex at Rs 6.6 lakh crore, up from Rs 5.1 lakh crore in the same period of the previous financial year.

While revenues have grown in absolute terms, the pace of collection slowed compared to the previous year, as the government has announced tax concessions for the middle class. Besides the GST rate cuts, which kicked in from September 22, are also beginning to reflect in the revenue figures. However, the reduction in taxes is playing a key role in accelerating growth in the economy.

Net tax revenue stood at Rs 13.94 lakh crore, or 49.1 per cent of Budget Estimates, compared with 56 per cent achieved during the same period last year. Overall revenue receipts were at 55.9 per cent of the annual target, compared with close to 60 per cent a year earlier.

However, there was a silver lining in the sharp increase in non-tax revenue, which touched 88.6 per cent of the Budget Estimates during the first eight months of the current financial year, as the government’s dividends from public sector undertakings (PSUs) surged during the current financial year due to the increase in profits.

Finance Minister Nirmala Sitharaman set the fiscal deficit target in the budget for 2025-26 at 4.4 per cent of GDP, which works out to Rs 15.7 lakh crore. This is part of the government’s commitment to follow a descending gliding path on the deficit to strengthen the country’s fiscal position. India’s fiscal deficit for 2024-25 stood at 4.8 per cent of GDP as part of the revised estimate.

A decline in the fiscal deficit strengthens the fundamentals of the economy and paves the way for growth with price stability. It leads to a reduction in borrowing by the government, thus leaving more funds in the banking sector for lending to corporates and consumers, which leads to higher economic growth.