Week ending 20th Dec 2025

# 1 Markets

1.1 Indian equities ended last week marginally lower (~0.5%), with Nifty 50 at ~25,966 and Sensex at ~84,929 after a four-day losing streak snapped by Friday’s broad rebound.​ Profit-taking near highs and FPI selling weighed, offset by DII buying and global Fed rate-cut optimism aiding the close.​  Global risk sentiment improved after supportive cues on US rates, but domestic markets saw continued profit-booking after a strong prior run-up.

1.2 Indian bond yields edged higher last week with 10Y G-Sec rising ~10 bps to 6.62% amid FPI selling and RBI bond buys providing some counterbalance.​

1.3 US equities closed the week modestly lower, with S&P 500 down nearly -2%, Nasdaq -3%, Dow marginally up. Late-week rally on softer inflation data and Fed rate-cut hopes lifted Friday gains (S&P +0.9%, Nasdaq +1.3%), but mega-cap selloff dominated amid valuation concerns.​

1.4 US Treasury yields dipped modestly last week with 10Y falling from 4.18% to 4.12% amid softer CPI (2.7% headline) and rising unemployment (4.6%), boosting Fed cut odds.​

# 2 RBI

2.1 RBI last week approved risk-based deposit insurance framework replacing the long-standing flat-rate system.

• Sound banks are expected to pay lower insurance premiums, while weaker banks may continue at current rates or face higher charges.
  • Currently, banks pay a flat premium of 12 paise per ₹100 of assessable deposits under the DICGC scheme.
  • Under the new framework, less sound banks could be charged up to 15 paise, while stronger banks may see meaningful savings.
• The deposit insurance cover remains unchanged at ₹5 lakh per depositor per bank, in force since February 2020.
  • Of 293.7 crore insured accounts, 97.54% were fully protected as of March 2025.
  • Insured deposits constituted 41.52% of total assessable deposits of ₹2.41 lakh crore at March-end 2025.

RBI’s approval of risk-based deposit insurance marks a shift toward pricing bank risk more accurately rewarding stronger balance sheets while tightening discipline for weaker banks.

2.2 CIBIL published its quarterly Credit Market Indicator [CMI] last week. CMI provides a comprehensive measure of retail credit market health in India, tracking changes across four key pillars: demand, supply, consumer behaviour, and performance (asset quality). A higher CMI value signals improving credit market conditions, while a lower value indicates deterioration

• Overall CMI stood at 99 in September, suggesting a largely stable credit environment.

• Overall retail credit demand improved during the quarter, supported by festive season spending and Goods and Services Tax 2.0 implementation

 

• Demand side

• • Consumer durable loans saw the highest incremental growth during the festive period, followed by auto and two-wheeler loans.
  • Credit demand showed negative growth among young borrowers while growth in new-to-credit customers was flat.
  • Growth in credit-active consumers slowed to 9% year-on-year, indicating lender preference for existing customers.
  • Balance-level delinquencies improved year-on-year for home loans, personal loans, credit cards, and gold loans.
• Supply-side (lender behaviour and origination mix)
  • Prime and above-prime borrowers formed 58% of total loan originations.
  • Secured products (home and auto loans) rebounded after the prior year’s decline.
• Stress pockets to monitor
  • Stress was visible in micro loan-against-property (micro-LAP) and small-ticket housing loans, linked partly to higher borrower leverage where customers hold both secured and unsecured credit exposures.
  • Delinquency Micro-LAP: up 29 basis points; Small-ticket housing: up 19 basis points

Overall, festive-driven demand and rural participation buoyed retail credit growth, though emerging stress in lower-ticket secured segments warrants prudent lending vigilance.

# 3 SEBI

3.1 SEBI board approved key changes last week effective April 1, 2026

Mutual Funds

• Brokerage cap reduced to 6 bps. from 12 bps. in cash market and 2 bps from 5 bps in derivatives market. Additional 5 bps over exit load removed.
  1. Negative impact, for institutional brokers but resulting in savings for AMCs.
• Introduction of Base Expense Ratio (BER). BER excludes statutory levies such as STT, CTT and GST
• Total Expense Ratio (TER) will now be transparently disclosed as: TER = BER + brokerage + regulatory levies + statutory taxes
  1. This will avoid double-charging and improve cost visibility for investors
  2. For equity-oriented open-ended schemes of mutual funds, the Expense Ratio limit stands revised lower by 10 bps for all AUM slabs, except for the lowest slab of up to Rs 5bn, for which the revision is 15 bps lower, but the limit itself will be applied differently.
  3. Importantly, then, the limit was earlier applied to TER whereas the limit now will be applied to the BER, which excludes brokerage, statutory and regulatory levies.

Stockbrokers

• Stockbroker rules (unchanged since 1992) modified and reorganised into 11 chapters
• Stock exchanges designated as first-line regulators.
• Simplified criteria for “qualified stockbrokers” to strengthen supervision of large, high-activity brokers

 

Impact

• Lower costs for mutual fund investors, improving long-term returns
• Greater transparency in expense disclosures; clearer separation of taxes and fees
• Pressure on AMC margins, especially on brokerage and execution costs
• Possible cost pass-through to distributors, affecting distribution economics

 

SEBI has opted for a measured reform—meaningfully reducing investor costs and improving transparency, while stopping short of the more disruptive cuts proposed earlier. The move is structurally positive for investors and domestic market depth, but margin-negative for AMCs, particularly smaller players.

3.2 SEBI last Wednesday increased the threshold for identifying High Value Debt Listed Entities (HVDLEs) to ₹5,000 crore of outstanding non-convertible debt from ₹1,000 crore.

• Move aimed at easing compliance burden and improving ease of doing business, especially for frequent bond issuers.
  • Regulated entities such as NBFCs, HFCs, ARCs, insurance companies and REITs stand to benefit.
• Higher threshold reduces the number of entities classified as HVDLEs, making corporate bond issuance simpler and less costly.

Corporate governance changes for HVDLEs:

• Continuation beyond 75 years allowed only via special resolution with shareholder approval.
• Time taken for regulatory/statutory/government approvals excluded from timelines for shareholder approval of directors.
• No shareholder approval needed for regulator, debenture trustee, court or tribunal-appointed nominee directors.

Overall, SEBI’s move raises the compliance bar only for truly large debt issuers, cutting governance costs for most entities while making corporate bond fund-raising faster and more efficient.Top of FormBottom of Form

3.3 SEBI Board last week amended ICDR regulations – Key highlights

• Draft abridged prospectus and abridged RHP introduced to provide a concise, standardised summary of key business, financial and risk information at the DRHP/RHP stage.
  • This will improve investor understanding early in the IPO process and reduce reliance on lengthy offer documents or informal sources.
• Pledged shares to be deemed lock-in compliant even if depositories cannot technically impose a lock-in, addressing operational challenges during IPOs (esp.startups) and post-listing compliance.
• Requirement for listed companies to issue Letters of Confirmation (LOC) to investors removed.
• Unclaimed amounts on non-convertible securities to be transferred to the Investor Education and Protection Fund (IEPF) after seven years from maturity, replacing multiple interim transfers.
• Debt issuers permitted to offer incentives (additional interest or issue-price discounts) to specific investor categories such as senior citizens and women, to broaden retail participation in the debt market.
• Credit Rating Agencies (CRAs) allowed to rate instruments regulated by other financial sector regulators, even in the absence of explicit rating guidelines from those regulators.

ICDR Regulations have been amended to simplify and rationalise capital-raising disclosures for listed and IPO-bound companies. Overall, SEBI’s measures underscore a calibrated push to lower costs, simplify disclosures, and deepen domestic participation, even as near-term market direction remains more influenced by FII flows than regulatory fine-tuning.Top of FormBottom of Form

3.4 Govt has introduced Securities Markets Code (SMC) 2025 Bill in parliament last week – key highlights

• Consolidates Sebi Act (1992), Depositories Act (1996) and SCR Act (1956) into a single Securities Markets Code to simplify and modernise regulation.
• Reduces fragmentation arising from multiple acts and circulars; aims for consistency and ease of compliance.

• SEBI board members must disclose direct/indirect interests, with mandatory recusal recorded in board proceedings.

• Introduces an 8-year limitation period for SEBI to initiate inspections/investigations (with limited exceptions).

• Formal legislative backing allows SEBI to test new products/services with exemptions or modifications under safeguards.
• Enables instruments regulated by other authorities to be issued, held and listed on exchanges/depositories with approvals and prescribed conditions.

SMC 2025 marks a decisive shift towards simpler laws, tighter regulatory accountability, time-bound enforcement, and stronger investor protection to support India’s next phase of capital-market growth.

# 4 Insurance

4.1 Parliament last week approved 100% FDI in insurance space. Key changes

• IRDA as Regulator gets wider, principles-based authority to frame and adjust rules quickly without frequent legislative changes.
• Many operational rules shift from the law to regulations, allowing faster adaptation while retaining oversight.
• Focus moves from rigid shareholding limits to effective control, governance, solvency and fit-and-proper criteria.
• Minimum capital for reinsurers cut from ₹5,000 crore to ₹1,000 crore to support industry growth.
• Higher FDI and reinsurance participation could bring in more foreign capital, aiding rupee stability.

Comment:

1. Liberalisation, Privatisation and Globalisation [LPG] reforms opened India to global capital and competition, breaking monopolies and forcing sectors to modernise or perish. The result was lower prices, better services, global-scale Indian firms, and rapid expansion of sectors like telecom and banking that directly benefited consumers and the economy.
2. Over time, FDI caps were raised from 26% to 49%, then to 74%. Yet insurance never experienced the kind of explosive transformation seen in telecom or banking.
3. In this backdrop, Government approval for 100% FDI in insurance is not unambiguously positive for the following reasons:
4. India’s low insurance penetration at 3.8% of GDP justifies growth capital, but with deep domestic pools already available, 100% FDI risks crowding out local risk capital rather than genuinely expanding overall capital formation.
5. Allowing 100% FDI risks crowding out domestic long-term capital by shifting control, value creation, and future cash flows offshore, turning Indian insurance into an operating base but a financial satellite for foreign owners
6. If core governance, distribution, and profitability issues persist, raising FDI to 100% mainly enables ownership reshuffling or exits, with little new capital or innovation—while sidelining domestic patient capital.
7. Allowing unfettered 100% FDI in insurance cuts against the “domestic capital for domestic growth” policy narrative, just as Indian AIFs are ready to scale, arguing for a more balanced framework that preserves local capital and governance participation.

100% FDI may boost capital, but it won’t fix weak distribution, trust deficits, or poor claims behaviour—and more foreign players could sharpen underwriting and claims scrutiny, worsening customer friction. Competition will favour large, well-capitalised insurers, accelerate consolidation and squeeze smaller domestic players. More powers to IRDA to issue regulations may prove beneficial replacing present hard coded laws Top of FormBottom of Form

# 5 Economy

5.1 As per S&P Global release last week

• HSBC India Composite PMI fell to 58.9 in Dec 2025 (from 59.7 in Nov), the lowest since Feb 2025.
• Reflects softer growth in both manufacturing and services.
• Total new orders eased, though foreign sales rose at the fastest pace in three months.
• Input cost inflation remained mild, just above a 5.5-year low; output prices rose modestly, marking subdued price pressures overall.
• Business confidence stayed positive but weakened for a third month, hitting the lowest since Jul 2022.

• Manufacturing PMI eased to 55.7 in Dec (from 56.6 in Nov) — weakest since Dec 2023.

• Factory output growth remained strong but slowed to a 10‑month low.
• New and export orders grew, with exports hitting a three‑month high.
• Inventory growth slowed; supplier delivery times improved.

India’s December PMI data signal a moderation in growth momentum, with softer domestic demand and easing price pressures, even as export resilience offers some support.

5.2 As per data released by the Govt last week,

• The merchandise trade deficit narrowed to USD 24.53 billion in November, versus USD 41.68 billion in October

• • Merchandise exports: USD 38.13 billion (Nov) vs USD 34.38 billion (Oct). Highest at least in a decade.
  • Merchandise imports: USD 62.66 billion (Nov) vs USD 76.06 billion (Oct).
  • The improvement partly reflects a pullback from October’s elevated import base. Export momentum was attributed to higher shipments to the United States, the United Arab Emirates, and China.
• The pickup appears more volume-driven than price-led, with engineering goods and electronics cited as sectors rebounding after weakness in October.

November data provides near-term relief to external balances amid global uncertainty, but durability hinges on export demand persistence and import behaviour, particularly energy, electronics, and any renewed commodity-driven spikes.Top of FormBottom of Form

5.3 As per data released by Govt. last week

• India’s wholesale prices fell 0.32% YoY in November, easing from a 1.21% drop in October.
• Wholesale food prices decreased 2.6% in November, compared to a 5.04% drop in October.
• Vegetable prices plunged 20.23%, moderating from a 34.97% fall in the previous month.
• The data indicates slower deflation, driven by less steep declines in food and vegetable prices.

Wholesale deflation eased in November, signalling a gradual stabilisation in food and vegetable prices

 

# 6 PE/VC

6.1 OECD last week released 2025 Update on treatment of Permanent Establishment which is critical for PE/VC eco system. Introduces guidance on home offices creating Permanent Establishment (PE) under Article 5 Commentary, replacing “at disposal” test with two-step analysis: permanence and place of business.

• Permanence Test: Home office qualifies as fixed place only if used continuously over extended period for business; intermittent/incidental use insufficient.
• Place of Business Tests:
  • Quantitative: Generally, not a place of business if <50% of employee’s total working time over 12 months.
  • Qualitative (Commercial Reason): Applies if quantitative met; exists if employee’s presence facilitates business (e.g., local clients/suppliers), but not for personal preference or cost-saving.
• Denmark, Austria, Germany, Netherlands typically deny PE for optional/convenience-based remote work without employer control/benefit.
• India’s Position: Reserves against new tests, views home as at enterprise’s disposal; OECD Commentary persuasive but not binding unless in treaties.
• Recommendations:
  • MNCs: Implement WFH policies emphasizing temporary/employee-driven work; maintain records; assess vs. contractors/EOR.
  • Individuals/Founders: Avoid long-term home-based core activities to prevent PE/POEM risks.

OECD 2025 Update modernises PE rules for remote home offices via permanence and commercial substance tests, offering MNCs clearer guardrails against incidental global mobility risks while India’s reservation preserves stricter disposal-based scrutiny.

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