The Three Musketeers - Currency, Inflation and Growth. FY25 till Oct, India got FDI of $48 billion. Repatriation was at a record $34 billion, so net FDI is $14 billion. Indian companies have invested $12 billion FDI out of India so its a net zero for us. FIIs have sold $30 billion of Indian stocks. At 4.7 million H1FY25 foreign tourists are lower BY 10% of 2019 - this despite a global increase in tourism. In the same period Indians touring abroad increased to 15 million. Indian students studying abroad has climbed to 1.3 million. Sept FY25 India’s forex reserves touched a record $700 billion. In just three months its down by $60 billion. RBI position in the NDF market is estimated short by $60 billion Dollar Index that measures the strength of USD against a basket of currencies is at 109. At that index the emerging market tap shuts off. Trump wants to reduce trade deficit but also wants a strong dollar. Both cant happen so something will change. In 2024 Euro has lost 6%, Yen 10% while Yuan and INR have only lost 2.8% to USD. On a Real Effective Exchange Rate INR is still overvalued by 8%. It cant be a mere co-incidence that INR moves in tandem with Yuan. Bond markets have made it clear who's the real James Bond! US 10 year has been nudging 5%, UK, Europe, Japan yields are going up. Full employment data in the US means Fed rate cuts will get shallow. The differential between US 10 year and India 10 year is just 200 bps. RBI has no room to cut rates. The real pain is withdrawal of government cash balance from banking system to RBI and then not spending it, draining Rs.5 trillion as per soumya kanti ghosh Economist with SBI. Added pain is in managing currency, tight liquidity in the domestic markets was the unintended consequence. Core liquidity is now deficient by 2 trillion says Suresh Ganapathy of Macquarie. Post Covid, India has had a loan driven consumption demand surge and the bill of that has arrived. Liquidity is the condition precedent to growth in economy and markets. RBI needs to infuse liquidity and cut rates to revive demand. Now see the Catch 22. If RBI cuts rates, its good for growth but bad for currency. If they do not cut, good for INR but there is risk to growth. In a country where 81 crores are on Free Food, growth is the only way. India and US are the two expensive stock markets. US Exceptionalism is playing out and earning growth is intact. Indian companies are struggling on growth. The theory that SIPs are enough to sustain markets is under test. Politically, Economically and Militarily, 2025 is a tough year no matter what business you run. Only certainty is there is no certainty. We will get negative news flows ahead but need to focus on the controllable. No point over-analysing. Aircrafts take off against the wind, good businesses are built in difficult times. Sometimes the wind is behind you, sometimes against. You get what you get but you gotta do what you gotta do. https://x.com/aseemdhru/status/1881164137905938774?t=xKb2cciefLyLR6jdz9j7RA&s=19