Week ending 22nd March 2025

# 1 Markets

The Nifty surged 1,000 points this week, marking its best performance in nearly four years. Sensex closed higher at 76,905, while Nifty closed at 23,350—its fifth consecutive gain, supported by fresh FII inflows and Fed-driven optimism. Broader markets outperformed headline indices, buoyed by foreign interest, strong domestic fundamentals, and declining inflation. FIIs turned net buyers last week, reflecting renewed confidence in India. Historical Nifty data (2000–2024) for the last fortnight of March shows 18 upward moves versus 7 declines, with an average 2% rise—implying potential continued upside till fiscal year-end. However, caution is also surfacing. The SIP stoppage ratio touched a record 122% in February, signalling investor anxiety amidst market volatility and global rate concerns. Still, global fund managers reduced cash holdings, indicating rising risk appetite.

The yield on the 10-year bond dropped 8 bps to 6.62%, its sharpest weekly fall in four months, backed by resumed buying by FIIs, expectation of rate cuts by RBI.

The US Fed kept rates steady but signalled two rate cuts in 2025. It also slowed quantitative tightening to preserve liquidity. However, the Fed downgraded GDP growth to 1.7% (from 2.1%) and raised inflation (PCE: 2.7%, Core PCE: 2.8%) and unemployment forecasts (to 4.4%). These point toward stagflation risks. The US Treasury yield curve remains inverted, traditionally a sign of recession risk. While the US grapples with economic fragility, the Fed’s dovish shift has buoyed global sentiment. Yields softened with 10Y closing lower at 4.24%.  All the three broad indices moved up positively ~1%.

# 2 RBI

2.1 As per data published by RBI last week,

• Banking credit in the economy grew by 11.1% year-on-year (Y-o-Y) in the fortnight ended March 7, while deposits grew at 10.2% during the same period, which is a gap of around 90 basis points (bps)
• However, on an absolute basis, deposits increased by ₹2.25 trillion over the previous fortnight, while credit grew by ₹1.38 trillion.
• As of March 7, outstanding deposits stood at ₹181.28 trillion, while outstanding credit reached ₹225.10 trillion.

Deposit growth higher than credit growth could calm RBI’s concerns on increasing CD ratio witnessed during the last 2 quarters.

# 3 SEBI

3.1 SEBI has proposed regulatory changes allowing startup founders to retain their employee stock option schemes (ESOPs) even after their companies go public.

• In their early stages, startups often compensate founders with ESOPs instead of high salaries to conserve cash and align their interests with shareholders. However, as companies secure investments, founders see their equity stake diluted.
• Currently SEBI mandates that founders be classified as promoters when filing papers for IPO. Existing rules prohibit ESOPs from being issued to promoters.
• SEBI has acknowledged ambiguity in current regulations as it remains unclear whether an individual who received ESOPs as an employee and later became a promoter can exercise both vested and unvested options.

• Sebi stated that requiring an employee, later classified as a promoter due to their shareholding and options, to forgo their benefits may not be justified.

While Sebi proposes allowing these founders to retain previously granted ESOPs, it maintains that companies cannot issue new ESOPs to employees when they become promoters. Though the rule barring promoters from receiving fresh ESOPs will remain unchanged, this revision is a great relief for the Startups especially those who are aspiring to go for IPOs.

3.2 SEBI announced a relaxation of the ‘skin in the game’ norms for mutual funds, effective April 1, 2025. The updated rules allow a slab-wise contribution by designated AMC employees into mutual fund schemes they oversee, replacing the earlier flat 20% requirement of remuneration in MF units. Key changes include:

• New slab-based structure based on gross annual CTC (net of income tax and statutory deductions) with no mandatory investment for those earning up to Rs. 25 lakh and up to 22.5% for those earning above Rs. 1 cr.

• Two compliance options for AMCs one excluding ESOPs and another including ESOPs. Employees without ESOPs would follow option 1.
• Two categories of employees with Category A covering key investment and compliance personnel while Category B covering senior management and department heads outside core investment functions.

MF industry is facing huge shortage of talented fund managers, and this revision is timely as it addresses the pain point caused by SEBI’s mandate. Revision aims to simplify compliance while maintaining alignment of employee interests with those of mutual fund investors.

3.3 SEBI on Thursday introduced modifications to the disclosure requirements for shareholding patterns in a bid to improve the clarity.

• Under the revised format, listed entities are required to disclose details of non-disposal undertakings (NDU), other encumbrances, and the total number of shares pledged or otherwise encumbered, including NDUs,
• Additionally, a new column has been added to capture the total number of shares on a fully diluted basis, including warrants, ESOPs, and convertible securities.

These new requirements, which will come into effect from the quarter ending June 30, 2025, aimed at providing further clarity and transparency in the disclosure of shareholding pattern to the investors in the securities market.

3.4 SEBI has proposed in its draft consultation paper released last Thursday

• to make electronic book provider (EBP) platform mandatory for all private placement of debt securities of issue size of over ₹20 crore from the current threshold of ₹50 crore.

• It has also proposed extending products on the EBP platform to infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). For private placement of units of InvITs and REITs above ₹1,000 crore, issuer has to access the EBP platform for such issuances.
• Further, the green shoe portion in issues should not exceed three times the base issue size, the regulator said.

Though this is a continuing attempt to democratise access to bonds, placing in EBP platform does not necessarily bring depth and right price discovery. What happens presently is prior marketing of bonds and expected yield range by the issuers and placement happens mostly within that range by banks who warehouses them and place them with HNIs through wealth management team.

3.5 SEBI has proposed changes to OFS Norms in its Consultation Paper released last week.

• SEBI proposes an amendment to the proviso in Regulation 8 to explicitly include equity shares received upon conversion of fully paid-up compulsorily convertible securities under the exemption.

• Currently only fully paid-up shares held by sellers for at least 1 year can be offered via OFS.
• The one-year holding period is calculated including the period for which the underlying compulsorily convertible securities or depository receipts were held before conversion.
• An exemption from the one-year holding rule is currently available only if the shares were acquired through a court/tribunal/government-approved scheme (under Sections 230–234 of Companies Act, 2013), and if the business/invested capital existed for over a year before such scheme approval.

The proposed amendment would remove the ambiguity existed on whether equity shares arising from the conversion of compulsorily convertible securities (CCS), acquired through such schemes, also qualify for this exemption.  This would also align the OFS norms with Minimum Promoters’ Contribution requirements which permit similar treatment.

# 4 Economy

4.1 Key takeaways from India Economic Monitor – February 2025 (BCG)

• Growth and Industrial Activity positive – growth in IIP (6%), growth in cement production (11%) and steel consumption (12%) complimented by manufacturing PMI at 57.7 and Services PMI at 56.5 and GST collections hitting ₹ 1.96 Tn (+11% MoM), driven by stronger imports and domestic activity.
• Growth in Automobile Sector with surging passenger vehicle sales (26% MoM), two-wheeler sales (38% MoM) and higher EV registrations (31% MoM)
• Challenge in external trade with lower merchandise exports (down 4% MoM), stable imports but growing services exports (18% MoM)
• Positive Digital and Financial Indicators – UPI hitting new high of 17 bn transactions, growth in credit by 11% YoYand deposit growth up by 10% and insurance premiums growing by 8% MoM
• Inflation softening with CPI at five months low of 4.3%

 

The Indian economy displayed mixed performance across sectors in Dec’24–Jan’25, with strong industrial output and domestic consumption indicators contrasting with a widening trade deficit and cautious financial market sentiment.

4.2 Fitch Ratings last Wednesday in its Global Economic Outlook retained India’s GDP growth for FY 26 at 6.5% while revising upwards for FY27 to 6.3% from its previous projections. Attributed this growth to following:

• India’s low reliance on external demand to shield it from US trade policies.
• Consumer spending to pick up pace in the coming two fiscals, albeit at a slower pace, it noted.
• Business confidence remains high, and lending surveys point to continued double-digit growth in bank lending to the private sector.
• Likely pickup in capital spending in FY26 and FY27.
• Inflation to decline to 4% and policy rate to go down to 5.75% by Dec 2025.

Coming on the back of global uncertainty caused by likely trade wars, this outlook is reassuring and equity markets reacted positively last week.

4.3 As per data released by Govt. last week,

1. India’s WPI based inflation rose to 2.38% in February from 2.31% in January, driven by a slower contraction in fuel and power inflation and a rise in manufactured goods inflation.
2. Food inflation, though still elevated at 5.94% annually, showed signs of easing from 8.85% in December and 7.47% in January.
3. Manufactured product inflation, which constitutes 64% of the WPI, climbed to 2.86% in February from 2.51% in January.
4. Fuel and power prices continued to contract, falling 0.71% year-on-year, compared to sharper declines in the preceding two months.

Coming on the back of slowing CPI inflation, bond markets cheered the announcement bringing down yields last week.

4.4 As per Commerce Ministry release last week,

• India’s merchandise trade deficit narrowed to a 42-month low of $14.05 billion, down from $22.9 billion in January 2025 and $19.5 billion in February 2024, driven by a decline in gold, silver, and crude oil imports.

• Exports (goods): $36.91 billion (↓10.84% YoY)
• Imports (goods): $50.96 billion (↓16.3% YoY; lowest in 22 months)
• Gold imports: $2.3 billion (↓from $2.68 billion in Jan)
• Crude oil imports: $11.8 billion (↓from $13.4 billion in Jan)
• Services exports/imports: $35.03 billion / $16.55 billion
• Combined goods and services trade surplus: $4.43 billion – first since the pandemic

Despite a fourth straight month of export contraction, the data raises expectations of a current account surplus (~$5 billion, or 0.5% of GDP) in Q4 FY25.  A shrinking trade deficit may provide short-term relief, but falling exports raise concerns about global demand, supply chain competitiveness and external trade resilience

# 5 PE/VC

As per Longhouse Report released last week

1. India’s startup ecosystem is set for significant growth, with the number of startups projected to double from 1.2 lakh in 2023 to 2.4 lakh by 2030. The number of unicorns is expected to rise from 120 to 280 during this period.
2. This expansion could generate up to 50 million jobs by 2030:

1. 4–5 million direct white-collar jobs
2. 9–10 million gig economy roles
3. 35–40 million indirect jobs across industries

3. Notably, startup founders are increasingly experienced:

1. 40% had 10–15 years of work experience (2020–2024 vs. 26% in 2008–2013)
2. 55% held leadership roles prior to founding
3. 30% had over 20 years of experience

Investor focus is shifting toward AI-led innovation, deeptech, and sustainability-focused startups. AI is highlighted as both a disruptor and a job creator, fuelling demand in areas like enterprise transformation and workflow automation.