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    India’s trade deficit rose from $24.53 billion to $25.04 billion in December

    by VT Markets
    /
    Jan 15, 2026
    India’s trade deficit increased to $25.04 billion in December, rising from $24.53 billion before. This growing gap is a result of higher import costs and changes in export demand. The government is facing challenges in managing these economic factors to create stability. This information is important for market analysts who are assessing the future economic situation. The December 2025 trade deficit of $25.04 billion signals ongoing pressure on the Indian Rupee. A larger trade gap means more demand for US dollars to cover imports, which has pushed the rupee past the 84.70 mark in early trading this week. In response, we are preparing for potential further weakness by considering long positions in USD/INR futures and call options. Uncertainty about the currency’s direction has increased market nervousness. The India VIX, a key measure of expected volatility, has risen by over 8% in the past week, now sitting around 15.5. This volatility makes buying option straddles on the USD/INR pair a smart strategy to take advantage of anticipated price swings. The trade deficit is largely driven by persistently high global crude oil prices, which have stayed above $90 a barrel during the last quarter of 2025. These ongoing import costs can hurt corporate earnings and slow economic growth, leading to a bearish outlook for Indian stocks. As a precaution, we are considering purchasing Nifty 50 put options to protect against a possible market downturn in the coming weeks. Historically, the Reserve Bank of India has intervened when the trade deficit has become a major issue, like during the volatility spikes in 2022 when the deficit approached $30 billion. Although the RBI has not acted yet, continued pressure on the rupee may lead them to consider raising short-term interest rates to stabilize the currency. Traders should keep an eye on overnight index swaps for signs that the market is starting to expect a possible rate hike.

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