# 1 Markets
India’s equity indices rebounded on Friday, with the Nifty closing at 25,112 and Sensex at 82,408, as markets rallied after US President Trump paused plans that could have escalated US involvement in the Israel-Iran conflict; foreign portfolio investors turned net buyers, investing ₹7,941 crore. Meanwhile, corporate performance continues to lag macro growth, with BS1000 companies’ revenues rising just 6.4% in FY25—well below the 9.8% nominal GDP growth, marking the second consecutive year of underperformance. Geopolitical tensions and earnings growth would continue to weigh on movements ahead.
Indian government bond yields hit a five-week high on Friday as higher oil prices and caution before the weekly debt auction dampened sentiment. The yield on the benchmark 10-year bond closed at 6.31% despite softening during early part of the week.
The US Fed held rates steady but reaffirmed its forecast of two 25 bps rate cuts in 2025, despite upward revisions to inflation (3%) and downward revisions to GDP growth (1.4%).
Markets reacted positively to the medium-term easing signal, though policymakers showed increasing divergence on rate path projections. Equity markets reacted negatively with all the 3 indices ending lower on Friday while bond yields softened on the likely cuts ahead and 10y yield softened to 4.37% on Friday.
# 2 RBI
2.1 The RBI has reduced the Priority Sector Lending (PSL) target for Small Finance Banks (SFBs) from 75% to 60% of their loans, effective FY26. While 40% must follow existing PSL sub-sector norms, the remaining 20% can be flexibly deployed across PSL areas of strength.
This aligns with RBI’s earlier move to ease PSL norms for urban cooperative banks and aims to improve credit targeting without overburdening smaller banks. Perhaps this may help SFB to diversify into more remunerative assets to improve their profitability.
2.2 RBI has significantly eased final norms on project finance provisioning compared to the draft released in May 2024:
- Under-construction projects: Standard asset provisioning cut to 1% (vs. 5% in draft).
- Under-construction commercial real estate (CRE): Slightly higher at 1.25%.
- Operational phase provisioning:
- 4% for general project loans (unchanged),
- 75% for housing-related real estate,
- 1% for commercial real estate (vs. 2.5% earlier proposed).
- DCCO deferment:
- Permitted up to 3 years (infra) and 2 years (non-infra).
- Additional provisions for standard accounts with DCCO deferrals: – 0.375% (infra) and 0.5625% (non-infra).
- Upgradation from NPA to standard: Allowed only post satisfactory project performance and no further DCCO extension.
- Resolution plans: Shift to a principle-based approach, replacing the rigid 360-day performance clause in the draft.
Impact:
- Minimal profit hit for lenders as peak provisioning reduced to 1–1.25% for under-construction project finance and CRE loans (vs. 5% in draft), sharply lowering anticipated RoA impact for both banks and NBFCs.
- No backdated provisioning required as provisions apply prospectively from October 2025, further limiting earnings drag.
- Earlier norms would have pushed interest rates to 9.5% vs. 8%. Now, marginal repricing to ~8.05% expected – a negligible shift.
- New requirement mandates 50–75% land acquisition before sanction — could delay disbursals but ensures uniform treatment across projects.
- Overall profitability and capital impact now expected to be negligible, with relief seen across the lending ecosystem.
2.3 As per Deven Choksey report on NBFCs, last week
- NBFCs are increasingly raising capital via public deposits and bonds, moving away from traditional bank borrowings.
- Lending grew 20% YoY, outpacing banks (12%), led by strong demand in gold loans; total NBFC credit reached ₹24.5Tn.
- Large NBFCs saw 8% profit growth, while MFIs’ profits dropped 95% due to stress and provisioning.
- Cost-to-income ratio improved slightly to 36.2% (from 36.7%).
- Credit to MSMEs grew at a 32% CAGR (FY21–24) private banks (20.9%) and PSBs (10.4%).
- NPAs improved by 10 bps, but MFI delinquencies worsened.
- NBFCs hold 45% share in micro-LAP (loans < ₹1Mn), well ahead of private banks (~25%).
Overall, NBFCs are growing faster, diversifying funding, and consolidating dominance in niche segments like MSME and LAP despite stress in microfinance.
2.4 RBI has introduced the Master Direction 2025 regulating Electronic Trading Platforms [ETPs] replacing the 2018 guidelines and setting new rules.
- Authorization is mandatory for ETP operators; minimum net worth of ₹5 crore required.
- ETPs must maintain robust technology, ensure real-time trade dissemination, and implement strong risk management.
- Operators must submit quarterly reports and transaction data to RBI and trade repositories.
- ETPs are excluded if operated solely by scheduled banks or primary dealers under certain conditions.
The directions aim to tighten oversight and improve how these platforms operate within India’s financial market framework. This is also complimented by draft guidelines to govern rupee interest rate derivatives to reduce compliance burden for the participants.
# 3 SEBI
3.1 SEBI on 18th June 2025 approved a bunch of changes that, while sounding procedural, could tweak how capital markets function. Some of these amendments were long overdue. Critical analysis of principal changes is summarised
- SEBI has proposed a major change to the delisting process for public sector undertakings (PSUs). Until now, delisting required a reverse book-building process, where minority shareholders bid their desired price and approval from two-thirds of public shareholders was mandatory. However, this process was often derailed by inflated bids by a few derailing the whole exercise.
As per proposed changes, If the government already holds 90% or more in a PSU, it can bypass this process entirely and delist the company by offering a fixed 15% premium over the regulatory floor price, which will be determined using prior acquisition prices and valuation reports.
This could accelerate India’s disinvestment program but removes a key protection for minority investors. With several PSUs already above the 90% ownership mark, the impact could be swift.
- SEBI has eased rules to support overseas-registered Indian startups looking to list in India. Earlier, shares arising from compulsorily convertible securities (CCS)—a VC-friendly structure—were not allowed in Offer for Sale (OFS) during IPOs, complicating reverse-flipping (i.e., shifting the company’s base back to India).
As per proposed changes SEBI allows these converted shares in OFS, making it easier for such startups to list on Indian stock exchanges. The relaxed regulatory stance fits into the Indian investor appetite for quality paper that draws startups back to the country after exploring deep VC markets abroad
- Another headache with startups was around Employee Stock Ownership Plans (ESOPs). Presently, if a founder was classified as a promoter, they had to forfeit their ESOPs before the company filed its Draft Red Herring Prospectus (DRHP).
As per proposed changes, SEBI now allows founders classified as promoters to retain ESOPs granted at least one year before filing the DRHP.
Leadership continuity is preserved if founders remain invested in their companies post-listing. However, SEBI must balance this flexibility with safeguards against round-tripping, promoter misclassification, and valuation manipulation.
- A Demat Mandate & QIP Overhaul
- All promoters, directors, and key shareholders are required to fully dematerialise their shares before filing the DRHP—ending the era of physical certificates. A small step with big implications for transparency and efficiency.
- Qualified Institutional Placements (QIPs), is also streamlined. Companies can now skip exhaustive audits and focus on key disclosures, making fundraises faster.
QIP pricing often signals market value. If based on partial or unaudited data, it could distort price discovery. SEBI is betting on speed—without losing sight of market integrity.
- Co-Investments for AIFs
Presently, co investments are required to be done using Co investment-PMS vehicles making it operationally challenging and uncomfortable for investee companies.
SEBI now allows AIFs to launch “Co-investment schemes” as AIF, under the same regulatory umbrella—eliminating the need for separate PMS licenses. All investors, whether in the main fund or sidecar, must enter and exit together on identical terms. This offers flexibility to large investors while ensuring fairness and aligns Indian fund structures more closely with global PE/VC practices.
- Angel Funds:
- Angel investors must now be Accredited Investors (AIs), recognised as Qualified Institutional Buyers (QIBs) for Angel Fund investments.
- Investment limits per company are revised to ₹10 lakh–25 crore (from ₹25 lakh–10 crore),
- 25% ceiling per investee company has been removed.
- Angel Funds can now accept contributions from over 200 AIs, make follow-on investments in companies no longer classified as start-ups
- A minimum sponsor/manager commitment of 0.5% or ₹50,000 per investment is also mandated.
- Other changes
- Social Stock Exchange relaunched with looser disclosures and broader eligibility to revive NGO/social enterprise fundraising.
- Related-party QIBs now count as public investors in REITs/InviTs — easing listing and index hurdles.
- Lower compliance for those FPIs investing in G-Secs via VRR/FAR routes.
- Analysts/Advisers can now meet deposit norms via liquid/overnight MFs.
- One-time settlement scheme approved for old disputes – legacy cases.
SEBI is cutting red tape, removing friction, and trying to modernise everything from delisting to disclosures, social investing to startup fundraising. It is also shifting more responsibility onto the market. If these reforms work, a maturing economy like India could unlock more efficient capital flows and deepen investor participation across sectors.
Overseas investors have been shedding Indian bonds of late. Easing of the KYC norms are unlikely to lead to an immediate trend reversal as that would require worldwide rate dynamics and geopolitical risks to settle in favour of the emerging markets.
3.2 SEBI in its consultation paper released last Wednesday has proposed significant changes in Accreditation Process framework.
- Agencies:
Current Rule: Only subsidiaries of stock exchanges or depositories are permitted to act as accreditation agencies. Currently limited to subsidiaries of stock exchanges and depositories (CDSL Ventures and NSDL Data Management).
Proposed Change: All KYC Registration Agencies (KRAs) registered with SEBI should also be allowed to function as accreditation agencies.
Since both existing accreditation agencies already double as KRAs, the transition is expected to be smooth and non-disruptive. This change is aimed at increasing competition, improving operational efficiency, and reducing costs for investors.
- Process:
a. Current Process: AIF managers can onboard an investor only after they receive an accreditation certificate.
(i) Proposed Process: AIF managers may conduct first-level due diligence and provisionally onboard investors.
b. However, the AIF must not accept any funds until the investor receives the official accreditation certificate from a registered accreditation agency.
The proposed framework aligns with SEBI’s broader strategy to liberalize and deepen India’s alternative investment landscape.
# 4 Economy
- As per data released on Friday
- India’s core sector growth slowed to a nine-month low of 0.7% in May; The growth was 1% in April this year and 6.9% in May 2024.
- Output in May shrank the most in the fertiliser sector at 5.9%, followed by electricity and natural gas where production fell 5.8% and 3.6%, respectively.
- Four of the eight core sectors recorded a positive year-on-year growth, with cement leading with a 9.2% expansion
Excess rains in the latter part of May, owing to the early onset of the monsoon, likely weighed on the performance of the electricity and some of the mining sectors in the month but the overall performance of the core sector remained lacklustre.
4.2 As per McKinsey report “India’s Future Arenas” released last week
- India could add $1.7–2 trillion in new revenue by 2030 across 18 high-potential sectors, up from $690 billion in 2023. These sectors—including EVs, AI, semiconductors, biopharma, cloud, defence, and e-commerce—may contribute ~30% of India’s incremental GDP by 2040.
- McKinsey classifies these into four strategic pathways:
- Build capabilities (e.g., semiconductors, robotics, nuclear fission)
- Scale domestic strengths (e.g., e-commerce, cloud, urban infra)
- Sharpen competitiveness (e.g., EVs, aerospace, biopharma)
- Seize global leadership (e.g., AI, auto components, cybersecurity, space)
The sectors were chosen based on disruptive potential, investment momentum, and market size, with tailored strategies needed for each.
4.3 As per CareEdge ratings report released
- India’s household savings fell for the third consecutive year to 18.1% of GDP in FY24, while gross domestic savings declined to 30.7%, reflecting a structural dip.
- Meanwhile, household financial liabilities surged to 6.2%, indicating rising dependence on credit.
- Rural India shows signs of revival, with wage growth (6.1%) outpacing inflation for four months straight and improving rural demand.
India’s declining household savings and rising debt highlight increasing financial vulnerability, despite stable inflation and rural demand recovery. Structural rural resilience and corporate cost rationalisation offer some macroeconomic cushioning amid weakening household balance sheets.
4.4 As per data released last week,
- India’s unemployment rate rose to 5.6% in May (vs 5.1% in April), driven by a sharper rise among women (5.8%) than men (5.6%).
- Urban unemployment stood higher at 6.9% compared to 5.1% in rural areas.
- The Labour Force Participation Rate (LFPR) fell to 54.8% from 55.6%, with female LFPR significantly low at 33.2% (vs 77.2% for males).
- The Worker Population Ratio (WPR) also dropped to 51.7% (from 52.8%), with steeper declines for women.
- Youth unemployment rose to 15% (from 13.8%). The weakening labour metrics were largely attributed to seasonal agri slowdown and extreme heat, limiting outdoor work.
India’s May labour data signals both seasonal and structural stress — with rising unemployment falling participation and sharp gaps in female and youth employment. Beyond weather-led effects, the persistently low female LFPR and high youth joblessness highlight deeper skilling and job creation challenges.
4.5 As per data released last week,
- Exports slightly dipped 2.17% to $38.7B while imports fell 1.7% to $60.6B, narrowing the trade deficit to $21.88 bn vs $ 22.09bn in May last year.
- India’s May trade data shows resilience despite global tariff tensions as there are no signs yet of a trade crisis, though risks persist from global uncertainties and rising gold imports amid surging prices.
- As per provisional data released last week
- Wholesale inflation fell to 0.39% in May, a 14-month low, driven by a favourable base and cooling prices in food, minerals, and fuel.
- Wholesale food inflation moderated to 1.72%, with 20 of 22 tracked food items showing YoY inflation easing.
- In Fuel & Power prices dropped 2.27% YoY; crude petroleum and gas declined 12.43%.
- Prices rose in manufactured goods moderately by 2.04%.
- Retail inflation (CPI) dropped to 2.82% in May, marking four straight months below 4% – a six-year low.
A normal monsoon and improved sowing may further ease food inflation. However, El Niño risks and global volatility remain watchpoints.
# 5 PE/VC
5.1 As per 360 One Wealth Creators list with 2013 individuals, with a combined net worth of ₹100 trillion published last week,
- 93% of India’s total tracked wealth is tied to publicly listed companies.
- Women own 24% of the wealth; 33% representation in pharma sector.
- Tata, Reliance, and Adani promoter families hold 24% of total promoter wealth (₹36 lakh crore).
- Top 50 business houses account for 59% of the wealth.
- Sectors by avg. individual wealth: Banking: ₹8,500 Cr; Telecom: ₹8,400 Cr; Aviation:₹7,900 Cr
- New-age entrepreneurs under 40 derive 60% of wealth from digital economy (broking, fintech, edtech, e-com).