Week ending 19th April 2025

Week ending 19^th April 2025

# 1 Markets

Equity markets posted their strongest weekly performance in four years, with benchmark indices surging to record highs. The rally was fuelled by robust foreign institutional investor (FII) inflows and easing geopolitical concerns following Trump’s announcement of halting tit-for-tat China tariffs. Sensex ended the week at 78,553 and Nifty at 23,851, fully reversing all year-to-date losses. Focus now shifts to corporate earnings, which are expected to drive market momentum in the coming weeks. Additionally, the US Federal Reserve’s policy stance in early May could influence short-term direction.

Indian bond yields saw a significant decline as expectations of continued rate cuts and liquidity support took hold.10-Year G-Sec yield dropped to 6.37% by Friday, reflecting strong demand. Markets anticipate the terminal repo rate to settle between 5.00–5.50% by December 2025, signalling a prolonged easing cycle.

In contrast, US markets remained under pressure as investors weighed persistent recession concerns, potential trade conflicts, and sticky inflation. S&P 500 fell 1.5%, while the Dow and Nasdaq dropped 2.7% and 2.6%, respectively.

The European Central Bank cut interest rates for the seventh consecutive time, aiming to counter growth headwinds triggered by US tariff measures. The US Federal Reserve, however, remains cautious and is unlikely to follow suit amid inflation concerns. US 10-Year Treasury yields eased 15 bps during the week following the 90-day pause announcement but still closed higher at 4.33% on Thursday.

# 2 Banking

2.1 Key takeaways from Bank Credit Growth Outlook (FY26) released by CRISIL last Tuesday

• Overall Credit Growth expected to accelerate to 13% in FY26 (from 11% in FY25), driven by regulatory support, consumption boost via tax cuts, softer interest rates.
• Corporate Credit (41% of bank books) growth seen at 9–10% in FY26 (vs. 8% in FY25), led by NBFC disbursements and infrastructure-linked demand (cement, steel, aluminium) though caution remains due to global tariff uncertainties.
• Retail Credit (~33% of loans) growth to improve to 13–14% (vs. 12% in FY25) driven by affordability in a lower interest rate regime, especially in mortgages.
• SME & Agri Loans credit growth at 16–17% and 11–12% respectively.

Amidst huge global uncertainty the report by CRISIL it is comforting to note that credit growth would continue

2.2 The RBI has decided last week not to activate the Countercyclical Capital Buffer (CCyB) at this time.

• The purpose of CCyB was to build capital buffers in good times for use during stress and prevent excessive credit growth and systemic risks.

• This framework was introduced in February 2015, using credit-to-GDP gap and other indicators.
• According to RBI current indicators that do not warrant activation of CCyB.

RBI decision would help banks to keep credit flowing to productive sectors, avoiding growth slowdown.

2.3 Key takeaways from CRISIL US Tariff impact report on Corporate Credit Quality post 90 day pause

• Only <0.25% of Crisil’s rated portfolio (~7,200 companies) is likely to be at risk due to US reciprocal tariffs.

• Companies potentially impacted are in manufacturing sub-sectors: diamond polishing, textiles, pharmaceuticals, chemicals, shrimp, automotive components, and industrial/electrical machinery.
• Affected companies have >15% revenue exposure to the US, with at least 25% of revenues from the US market.
• Credit Strength is high as Median gearing is <0.5x, Median interest coverage is >5x with no material credit quality deterioration anticipated.
• Analysis assumes tariffs will be implemented after the 90-day pause, in their original form.

The report must be comforting to India Inc., though it does not consider second-order impacts (e.g., supply diversions, market distortions) and does not account for potential global growth slowdown, given uncertainty on scope and enforcement.

2.4 RBI tightens scrutiny on NBFC-Fintech Partnerships and expanded its audit scope.

• RBI is now directly inspecting loan service providers (LSPs) that work with NBFCs, particularly those running customer-facing apps.
• Focus areas include KYC norms, handling of customer data, customer communication technology stack used for onboarding and data collection.
• There is a big change in approach as unlike earlier audits which were routed only through NBFCs, RBI is engaging on-site now with LSPs directly to assess processes and risks firsthand.

Enhanced audit has emanated from Systemic Risk Concerns including concentration risks, especially where many institutions rely on the same few LSPs. There is also increased attention on cybersecurity risks and data breaches from third-party systems.

# 3 SEBI

3.1 SEBI in its consultation paper released last week is considering relaxing investment limits for Mutual Funds (MFs) in REITs and InvITs to enable greater diversification and capital inflow.

• SEBI is evaluating if these instruments should be classified as ‘equity’ and included in equity indices for MF investments.
• Currently there are
  • REITs: 4 listed (e.g., Embassy, Brookfield, Mindspace, Nexus Select)
  • InvITs: 18 listed (e.g., Indus, NHIT, India Grid, Powergrid)

The discussion paper is released post expression of caution by market players against dedicated schemes due to limited listings and liquidity though there is a need to raise investment limits after due evaluation.

# 4 Economy

4.1 As per Fitch “Global Economic Outlook – April 2025 update’ report released last week,

• India’s economic growth forecast for FY26 lowered to 6.4% from 6.5% estimated earlier due to sharp escalation in global trade tensions.
• The FY25 growth projection has also been revised downward by 10 basis points to 6.2%.
• Global GDP growth forecast at 1.9% reduction from 2.3% projected earlier.
• India’s net trade contribution is expected to decline to 0.6 percentage points in FY26 from 1.7 percentage points in FY25, reflecting the impact of global trade disruptions

Moody’s Ratings last Wednesday in its report ‘Tariffs and Trade turmoil’

• Revises forecast of India’s CY 2025 GDP growth to 5.5-6.5%
• Estimate is now a shade lower than its February projection of 6.6 per cent

Revision factored in the “unpredictable” US tariffs which it said will hit business planning, stall investment and “raise the risk of a global economic recession”. Agency noted that the tariffs will weigh on global trade activity, reduce demand for regional exports and undermine business confidence, leading to reduced investment in the Asia-Pacific region

4.2 As per data released by Ministry of Commerce last week, India’s trade deficit widened sharply to $21.54 billion in March, rising from a three-year low of $14.05 billion in February.

• FY25 Exports: $437.42 billion (vs $437.07 billion in FY24).
  • Services Exports $383.51 billion up 12%
• FY25 Imports: $720.24 billion (vs $678.21 billion).
• FY25 Trade Deficit: $282.6 billion, highest in a decade.
  • March 2025 Trade Deficit: $21.54 billion (up from $14.05 billion in Feb and $15.3 billion in March 2024).
  • March Exports & Imports: $41.97 billion & $63.51 billion
• Key Export Drivers: Engineering goods, petroleum, electronics, pharma.

• Trade Surplus to US rose 6% to $41.18 billion (from $35.32 billion) seen on the back of Trump Tariffs.

Weak global demand, geopolitical tensions, and commodity price volatility weighed on India’s foreign trade.

4.3 As per data released by Govt last Tuesday,

• Retail inflation in India eased to 3.3% in March, down from 3.6% in February, marking the lowest level since August 2019. For FY 25, inflation stands at 4.6% VS. 5.4% in FY24.
• Second straight month of inflation remaining below RBI’s target of 4%. The decline is driven by a drop in food inflation to 2.7% from 3.8% and a favourable base effect.
• Wholesale price inflation [WPI] eased to a six-month low of 2.1% in March, from 2.4% in February largely due to lower food prices. The Wholesale Price Index (WPI), which measures changes in producer prices, however rose from 0.3% in March 2024. 
• The RBI projects average inflation at 4% in FY26, its target level on the following positive outlook factors:
  • India Meteorological Department forecasts above-average rainfall,
  • Global crude oil prices have declined.

Sustained seasonal correction in food prices led to the moderation in headline inflation in March. The declining trend, however, was not uniform as fuel & light and core inflation saw an upswing in the same period. Core inflation rose to 16month high of 4.1% driven by increase in precious metals, transport and education.  Success in inflation-targeting could enhance market confidence, support growth, and help stabilize the rupee both domestically and externally

# 5 PE/VC

5.1 AI Investment and Institutional Strategy – Key Takeaways (Stanford AI Index 2025 & Global Comparisons)

1. Global AI Investment – 2024 Figures

Country	Private Investment	Public Investment (Annual)	Remarks
USA	$109 bn	Not specified	Dominant global leader
China	$9.3 bn	Not specified	High private commitment
India	$1.4 bn	$260 mn (avg. per year over 5 yrs)	Ambitious but limited
France	$112 bn (pledged)	$1.1 bn	Balanced public-private model

2. India’s Strategic Gaps

• Total AI spend lags major economies, particularly in crowding-in private capital.
• No central mission-driven institution akin to France’s Inria or US strategic bodies.
• IndiaAI brings stakeholders together but lacks high-level, coordinated oversight.

3. Policy and Institutional Recommendations for India

• Create High-Level AI Commission analogous to Space Commission, report to PMO, supported by Digital India Corporation.
• Leverage Existing Institutions like Anusandhan NRF – strategic research direction. And BIRAC – model for AI startup support.
• Fund-of-Funds Strategy: Channel AI-specific capital via SIDBI FoF and NIIF and Act as anchor investor to attract private capital.

4. Precedents and Learnings from Indian Missions

• ISRO + IN-SPACe: Effective public-private space model.
• NPCI: Public digital rails + private innovation.
• Lesson: Institution-building with agile governance enables scale and innovation.

India must scale up investment, institutional capacity, and coordination urgently. Leveraging France’s playbook — adapted to Indian realities — can catalyse AI-led economic transformation. Inaction risks missing a generational opportunity to lead globally in AI.

5.2 As per Inc 42 report released last week,

• Robust Fundraising and Investor Activity was seen in Q1CY2025
• Q1 2025 saw $3.1B raised and over $3.2B in new funds launched.
• Early-stage and fintech remain dominant, while venture debt is rising as a preferred instrument.
• There is a growing focus on SaaS, deep tech, and consumer brands