# 1 Market
Indian equity markets posted the biggest weekly gain in nearly three months, with the Sensex and Nifty rising over 1.4% to close at 81,905 and 25,114, respectively. Sentiment was buoyed by hopes of Tariff resolution, a Fed rate cut, positive domestic policy cues, and an Infosys buyback, offsetting continued FII selling. The Nifty logged its longest winning streak in a year, supported by robust domestic institutional inflows. Near-term outlook remains constructive, with investors watching global monetary policy decisions and inflation data for fresh cues.
Indian bond yields remained rangebound last week, with the 10-year government bond yield ending near 6.48% on September 12, easing slightly on global rate cut expectations. Overall, the bond market stayed resilient despite global uncertainty and currency pressures.
US equity markets advanced last week, with the S&P 500 gaining 1.6%, the Nasdaq up 2%, and the Dow rising 1.1%, driven by hopes of Fed rate cuts and upbeat technology sector performance. The Nasdaq and S&P 500 closed at record highs, as investors responded positively to weaker jobs data and subdued inflation prints. Market sentiment remains constructive ahead of next week’s Fed meeting.
US Treasury yields were mostly steady last week, with the 10-year yield holding near 4.07% on September 12 as markets anticipated a potential Fed rate cut amid soft inflation and labour data. The overall tone remained constructive, with investors cautious ahead of the upcoming Fed meeting and policy signals. Interestingly, ECB left interest rates unchanged at 2% last Thursday with inflation back under control
# 2 RBI
2.1 As per S&P Global report released last week, NBFCs’ loan books are projected to grow 21–22% in FY25 and FY26, outpacing banks’ 11–12% growth, though slower than past trends.
- Growth is supported by retail lending under-penetration and strong capital buffers among upper-layer NBFCs, sustaining earnings momentum and net interest margins
- Stricter underwriting standards and tighter regulatory supervision (e.g., gold loans) are moderating growth but reducing systemic risk.
- Overall stable, but stress persists in microfinance (20% borrowers with 4+ loans, credit costs at 9% in FY24, >5% expected FY25) and unsecured loans.
- MFI-NBFCs in FY25 saw a 14% decline in loans as lenders curbed overleveraged borrowers; stress expected to peak this year.
- Growth in unsecured loans slowed sharply to 8–9% in FY25 (from 20%+ earlier) after RBI raised capital requirements; loan losses expected to peak by FY26.
NBFCs are set to outpace banks in loan growth, but with stricter underwriting and regulatory oversight ensuring a shift from rapid expansion to more sustainable, risk-calibrated growth.
2.2 NABARD is setting up a centralised digital lending platform (CDCI) for Regional Rural Banks (RRBs) to enhance competitiveness against NBFCs and MFIs.
- This follows the One State-One RRB policy (effective May 1, 2025), which reduced the number of RRBs from 43 to 28 for scale efficiencies.
- CDCI will digitise and automate credit delivery, boosting efficiency, transparency, and agility
- As of March 2025, RRBs had ₹7.14 lakh crore deposits (+8.2% y-o-y) and ₹5.27 lakh crore loans outstanding (+12.1% y-o-y).
NABARD’s centralised digital platform and consolidation of RRBs mark a decisive step towards scaling efficiency, deepening financial inclusion, and strengthening their competitiveness against NBFCs and MFIs.
2.3 Highlights from ICRA report released last week.
- Incremental bank credit expected to rise by ₹19–20.5 lakh cr. in FY26, implying 10.4–11.3% YoY growth.
- Excluding infrastructure NBFCs, loan book expected to expand 15–17% in FY26.
- Growth to be aided by GST rate cuts and upcoming CRR reduction, stimulating demand.
- Retail and MSME segments slowed growth for private banks and NBFCs; demand revival expected to ease this.
- FY26 credit costs to rise modestly – banks by 13 bps, NBFCs by 30 bps, sharper in non-housing segments.
- Risks: Global uncertainties, export-linked borrower stress (e.g., apparel sector, transport operators).
- Outlook: Stable for banks and NBFCs (ex-microfinance); microfinance sector negative. Smaller NBFCs with weak capital and high overdue levels remain most vulnerable.
Despite a slower start in FY26, GST rate cuts, easing deposit costs, lower credit-to-deposit ratio, and ample liquidity should support credit expansion for both banks and NBFCs.
# 3 SEBI
3.1 SEBI on Sept. 9, 2025, issued final guidelines on the Co Investment model to be adopted by Category I and II AIFs. Key Points
- SEBI has amended AIF Regulations to allow Category I and II AIFs to offer co-investment facilities through a separate co-investment scheme (CIV scheme) in addition to existing co-investment via Portfolio Management Route by the same fund manager. (PMS route).
- Managers must file a shelf placement memorandum detailing co-investment terms, governance, and regulatory framework.
- Individual investor co-investment in an investee company across CIV schemes is restricted to a maximum of three times the contribution made by the investor through the AIF’s main scheme, in a particular portfolio company.
- Co-investment related expenses are shared proportionately between the main AIF scheme and the CIV scheme.
Potential Impact
- Restrictions on co-investment multiples artificially kept at 3x, takes away the sheen of co investment interest. Instead, SEBI could have put total ceiling on co investment across portfolios which would have been operationally simple. It is noteworthy that such stipulation has not been mentioned for co investment through PMS.
- Each co investment vehicle requiring separate registration and demat is not only time consuming but totally avoidable.
- The circular likely facilitates larger and more organized co-investment pools, aiding capital raising and deal execution especially for private equity and venture funds.
While the CIV certainly address the operational rigidity through PMS route, the 3x artificial ceiling needs to be reviewed.
3.2 SEBI on Friday unveiled a sweeping package of reforms designed to galvanize the capital markets by making fundraising easier, liberalizing listing norms for large companies, and tightening governance across key institutions, including stock exchanges. Key decisions taken by SEBI Board:
3.2.1. Amendments to Securities Contracts (Regulation) Rules, 1957 (SCRR)
- Revision of Minimum Public Offer (MPO) and Minimum Public Shareholding (MPS) timelines for issuers with large market capitalizations.
- Companies with a post-issue market capitalization between ₹50,000 cr. and ₹1 lakh cr. can now have a minimum issue size of ₹1,000 crore plus 8% and will have five years to meet the 25% minimum public shareholding (MPS) rule.
- Previously, such companies fell under a broader category (market cap above ₹4,000 crore), which required a higher minimum public offer of 10% and a shorter timeline of three years to achieve the 25% MPS.
- For market cap between ₹1 trillion and ₹5 trillion, MPO is ₹6,250 crore plus at least 2.75% of the post-issue market cap.
- For market cap above ₹5 trillion, MPO is ₹15,000 crore plus at least 1% of the post-issue market cap, with a minimum dilution of 2.5%.
Extended gradual timelines for issuers with large market caps to achieve MPS of 25%, easing upfront dilution pressure, encouraging large issuers to list. Scarce liquidity often inflates valuations beyond fundamentals, making prices reflect scarcity premiums rather than true value.
3.2.2. Amendments to SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
- The number of anchor allottees for IPOs up to ₹250 crore will increase to up to 15 allottees from an unspecified number earlier, with a minimum of five.
- Insurance companies and pension funds will now be included in the reserved anchor allocation, with the total reserved portion for institutional players rising from 33% to 40%.
This provides structured opportunities for long-term domestic institutional investors (DIIs) such as insurers and pension funds, which is expected to enhance the credibility, stability, and quality of the anchor book.
3.2.3. Amendments to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) on Related Party Transactions (RPT)
- The current threshold of ₹1,000 crore or 10% of turnover will be replaced by a graduated system linked to a company’s scale for materiality disclosure. Simplified disclosures and clarified exemptions for retail purchases involving directors and KMPs.
- Revised thresholds for audit committee approvals for subsidiary RPTs.
This is a relief for fast-growing groups and brings particular ease for subsidiaries without lengthy operational records, who now benefit from clearer compliance processes. Number of RPT resolutions requiring member approval will reduce significantly, aligning regulatory focus on transactions of real substance.
3.2.4. SEBI (Foreign Portfolio Investors – FPIs) Regulations Amendments
- Participation of resident Indians in FPIs by allowing retail schemes based in IFSC with Indian sponsors or managers to register as FPIs.
- Alignment of sponsor contribution limits for IFSC funds with IFSCA regulations.
- Permitting Indian mutual funds to invest in overseas mutual funds/unit trusts registered as FPIs.
This makes a difference by expanding the FPI registration framework beyond just alternative investment funds (AIFs) in IFSCs to also include retail schemes, thereby broadening the avenues for Indian-managed funds in IFSCs to operate.
3.2.5. Accredited Investor and Large Value Funds (LVF) Regulatory Framework
- A new “AI-only” AIF scheme exclusively for accredited investors [AI] will be introduced with a lighter regulatory framework, including no cap on the number of investors and an extended tenure.
- The minimum investment for large value funds (LVFs) has also been lowered from ₹70 crore to ₹25 crore, in an effort to attract substantial risk capital under a more flexible regime, thereby facilitating greater capital formation.
Introduction of AI-only schemes with reduced compliance, encourages sophisticated investor participation. LVFs would witness now higher institutional participation with lowering of ticket size to Rs. 25 cr.
3.2.6. Introduction of Single Window Automatic & Generalised Access for Trusted Foreign Investors (SWAGAT-FI) Framework
- This is a single window framework – a kind of diplomatic passport for long-term, low-risk funds to counter continued equity outflows and applies to ~70% of 11,913 FPIs managing ~₹81 lakh crore in India.
- Eligible investors include Sovereign wealth funds, central banks, pension funds, large insurers, and mutual funds—government or highly regulated entities. Relaxations include
- Single clearance window across routes with reduced compliance.
- Registration validity up to 10 years (from 3).
- Single demat account allowed across investment routes.
- Faster FPI–FVCI conversion.
- Exemption from certain restrictions (e.g., aggregate NRI caps).
This unified registration and compliance framework for low-risk foreign investors reduces onboarding friction for trusted foreign investors and would attract more stable, long-term capital; reduce volatility from short-term FII selling; enhance India’s appeal as an investor-friendly market. SWAGAT-FI could bring more predictability to FII flows, especially at a time when India has been under the pump and in a volatile global scenario.
3.2.7 Launch of ‘India Market Access’ Website for FPIs- a digital platform consolidating registration, regulations, taxation, and compliance guidance for foreign investors.
India Market Access’ portal centralizes regulatory info, addressing investor challenges and reinforcing transparency.
3.2.8. Reclassification of Mutual Fund Investments in REITs and InvITs
- REITs reclassified as equity while InvITs retained as hybrid instruments
- Inclusion of qualified institutional buyers, family trusts, and mid to top-layer NBFCs as strategic investors for InvITs and REITs.
The changes cannot be timelier. As of March 2024, listed REITs constitute only 12% of India’s listed real estate market capitalisation and a mere 0.35% of the global REIT index. This stands in contrast to mature markets like the US, Australia and Britain, where REITs account for over 90% of listed real estate market capitalisation. REITs and InvITs presently categorised as hybrid instruments impose limitations on MF investments, capping exposure at 10% of a scheme’s NAV and 5% per issuer, thus limiting MF inflows. On the taxation front, the I-T Act 1961 aligns the tax treatment of long-term capital gains on REIT/InvIT units with that of equities.
The changes would thus enhance mutual fund investments and inclusion in equity indices, may help boost liquidity. Expanding the scope of strategic investors would enable REITs and InvITs attract capital from a much broader investor base.
3.2.9. Mutual Fund Investor Protection and Inclusion Enhancements
- Reduction of maximum exit load from 5% to 3%.
- mutual funds generally charge exit loads in the range of 1% to 2%. Hence, reducing the maximum exit load would align the regulatory requirement with the prevailing industry practice.
- Incentives for distributors onboarding investors from beyond top 30 cities (B-30) and new women investors. This would be capped at 1% of first application amount and yearly cap of Rs. 2000.
- New initiative to broaden financial inclusion.
3.2.10. Strengthening Governance of Market Infrastructure Institutions (MIIs)
- Appointment of two Executive Directors on MII Boards for critical operations and compliance focus. Defined roles and directorship norms to enhance operational and regulatory excellence.
- Currently, the board structure of MIIs features a significant gap in status between the managing director (MD) and key management personnel (KMPs) who head critical verticals. These KMPs do not serve on the governing board, and their roles are not formally prescribed in regulations. This move would therefore strengthen governance.
- Credit rating agencies (CRAs) are now permitted to rate financial instruments overseen by other regulators like the RBI and Irdai, provided these activities are conducted through a ring-fenced separate business unit.
Overall, the SEBI Board decisions reflect its broad agenda to balance ease of doing business, investor protection, market development, and global alignment in the rapidly evolving Indian securities markets.
3.3 MCA issued notification last week widening the ambit of fast-track mergers under Section 233, to speed up corporate restructuring and reduce tribunal delays.
- Background:
- Initially allowed only for small companies and wholly owned subsidiaries.
- 2021: Extended to startups and small firms.
- 2024: Extended for foreign holding company mergers with wholly owned Indian subsidiaries (reverse flipping).
- Newly included categories:
- Two or more unlisted companies (other than Section 8 non-profits) within prescribed thresholds.
- Holding company and subsidiary mergers (except where transferor is listed).
- Mergers between two or more subsidiaries of the same holding company (excluding listed transferors).
The expanded fast-track merger framework marks a significant step in easing corporate restructuring, offering unlisted groups and subsidiaries a quicker, simpler route for reorganisations. The widened eligibility for fast-track approvals reduce procedural complexities and marks a decisive step in easing M&A processes especially in the startup eco system and thus deepen ease of doing business framework.
# 4 Economy
4.1 Fitch in its outlook released last week
- Upgraded India’s FY26 GDP growth forecast to 6.9% (from 6.5%) on strong services momentum and resilient household/government consumption.
- Real GDP may be overstated due to weak wholesale prices and falling commodity costs; reversal possible if prices rise.
- Risks Identified: Rising US-India trade tensions posing sentiment and investment risks.
- Growth expected to moderate to 6.3% in FY27 and 6.2% in FY28 as economy runs above potential.
Fitch’s upgrade (higher than RBI estimate of 6.7%) underscores India’s near-term growth resilience, though medium-term risks from trade tensions and price dynamics could temper momentum.
4.2 As per data released last week,
- Consumer inflation accelerated to 2.07% in August 2025 (up from 1.61% in July)
- Headline inflation averaged 1.8% in July – August
- Food prices, which make up nearly half of the CPI basket, fell 0.69%, moderating from a 1.76% decline in July.
- Oils, fats, pulses, sugar, and protein-rich foods turned costlier, while vegetable deflation eased, with tomatoes spiking, food inflation thus exhibiting mixed signals.
- Rural inflation stayed lower than urban, given higher food weight.
This marked the first monthly increase in inflation in ten months, though it remained close to the RBI’s lower tolerance threshold of 2% under its inflation-targeting framework. Overall food and beverages inflation returned to positive territory (0.05%), pulling up headline CPI to average below the RBI’s 2.1% projection.
# 5 PE/VC
5.1 SEBI notified revised Angel Funds framework on Sept 8. Key highlights
- Definition includes Accredited investor [AI] or KMP of an angel fund or its manager who invests in the angel fund.
- Can raise funds only from AI at least five before first close. No minimum investment limit now. Can offer investment to max 200 non-accredited investors.
- Placement memorandum must be filed with SEBI through a merchant banker before circulation.
- Angel funds cannot launch multiple schemes, only direct investments from the Fund.
- Investments allowed only in startups (not promoted by corporate groups with turnover > ₹300 crore).
- Investment limits per company: Minimum: ₹10 lakh; Maximum: ₹25 crore
- Each investment must have at least two accredited investors.
- Angel funds cannot launch co-investment schemes
5.2 As per IVCA – EY PE/VC round up July 2025 released last week
- Total PE/VC investments: US$4 billion, a 32% increase year-on-year and slightly below June 2025 levels.
- Number of deals: 115, a 13% rise compared to July 2024.
- Large deals: 10 deals totalling US$2.8 billion, making up 69% of total investments.
- Top Investment sectors: Financial services (US$1.8 billion), real estate (US$481 million), and technology (US$472 million).
- Main investment strategies: Growth (US$2 billion), credit (US$792 million), buyouts (US$511 million), startups (US$424 million), PIPE (US$284 million).
- Exit activity: US$9.2 billion across 26 deals, a 267% year-on-year increase.
- Exit types: 86% strategic, amounting to US$7.9 billion.
- Market outlook: Market strength and liquidity are driving exits; economic factors like US tariffs and GST reforms influence strategy timing.