# 1 Markets
India’s equity benchmarks fell 1% on Friday, ending a six-day rally, with the Sensex at 81,306 and Nifty at 24,870. Heavy FII outflows of ₹25,500 crore in August, offset partly by DII buying, and concerns over US tariffs and monetary policy drove the broad-based selloff. As US hardens its stance on Russia and 50% tariff on India appears imminent, market may continue to witness volatility.
Indian government bond yields rose, with the 10-year benchmark crossing 6.5%, as fiscal concerns resurfaced over the proposed GST overhaul. The reform, meant to spur consumption and attract inflows, revived fears of higher debt supply and weighed on bonds, offsetting optimism from S&P’s rating upgrade.
The Fed held rates at 4.25%–4.50% for a fifth meeting, with two governors dissenting for a cut—the first dual dissent since 1993. Jobless claims rose to 235,000, continuing claims hit a 2021 high, and markets rebounded as Powell’s Jackson Hole speech opened the door to rate cuts, sending the Dow to a record and lifting the S&P 500 and Nasdaq by ~2%.
The 10-year US Treasury yield climbed to 4.33% ahead of Powell’s Jackson Hole speech, with markets pricing a 65% chance of a September cut. Yields later eased after Powell signalled potential rate cuts, though hawkish Fed remarks, and mixed data kept uncertainty high.
# 2 RBI
2.1 RBI has released draft norms on Counterparty Credit Risk (CCR) for banks as clearing members in equity and commodity derivatives.
- Granular, risk-sensitive norms: Replaces static add-on factors with differentiated Potential Future Exposure (PFE) add-ons by contract type (interest rate, FX, equities, commodities, precious metals) and tenor (≤1 year, 1–5 years, >5 years).
- Higher risk weights: Longer-tenor and more volatile contracts (equities, commodities) carry higher add-ons—e.g., equities 6–10%, commodities 10–15%, interest rates 0.25–1.5%.
- Global alignment: Brings Indian rules in line with Basel standards, enhancing regulatory clarity and risk sensitivity.
RBI’s draft CCR norms tighten capital rules with Basel-aligned, granular add-ons—raising discipline on long-tenor and volatile derivatives and strengthening systemic resilience.
2.2 Key Takeaways from Care Edge Rating report released last week.
- Gross non-performing assets (NPAs) for Indian banks fell sharply by 9.5% year-on-year in Q1FY26, reaching 2.3%.
- The NNPA ratio came down to 0.5%, its lowest level since the asset quality review (AQR) era and has remained steady for two consecutive quarters
- Public sector banks (PSBs) saw a decline in NPAs across most loan segments except agricultural loans.
- Private bank slippages grew 41% YoY (₹36,000 crore), notably higher than PSBs’ 14.4% (₹27,000 crore) with overall slippages rising 26% to ₹. 63000 cr.
- Banks wrote off ₹27,000 crore in bad loans (up by 3.84% YoY), with private banks more aggressive in clean-up than their public sector peers.
- Incremental slippages rose in MFI and retail credit segments, contributing to a sequential 0.5% Q-o-Q uptick in gross NPAs.
- The overall improvement is attributed to large-scale write-offs, sustained recovery of old NPAs, higher provision coverage, and previous resolutions via the Insolvency and Bankruptcy Code (IBC).
Despite a spike in fresh slippages, largely from unsecured retail and microfinance stress at private banks, the overall stress profile of the system continues to improve. Legacy clean-up, minimal large corporate defaults, and disciplined retail credit expansion have driven a steady decline in GNPA levels, underscoring that asset quality risks are contained at the system level even as near-term pressures shift towards select segments.
# 3 SEBI
3.1 SEBI on Friday through its draft guidelines proposed
- to introduce the closing auction session (CAS) to determine share price first for derivative stocks.
- Based on the experience gained, the same would be extended to all stocks at a later stage.
Passive funds typically track a broad spectrum of indices. If CAS is implemented only for Nifty 50 / Sensex 30 constituents, many stocks in the indices tracked by passive funds would continue to have their closing prices determined by the VWAP (volume weighted average price) methodology, while a subset would have their closing prices determined by the CAS mechanism. This mixed regime would complicate execution and increase operational complexity for passive funds.
It therefore appears prudent to extend the CAS framework to all the highly liquid stocks to reduce operational complexity for the passive funds.
3.2 SEBI on Friday proposed to modify the block deal framework. Block deal is execution of large trades through a single transaction without putting either the buyer or seller in a disadvantageous position. For this purpose, stock exchanges are permitted to provide a separate trading window.
- The minimum order size for block deals will be raised to ₹25 crore (from the present ₹10 crore).
- The block deal price band for non-derivative stocks will be expanded to 3% on either side of the reference price, up from 1%.
- The price band for F& O stocks will remain at 1% on either side of the reference price.
- Block deals will be conducted in two distinct trading windows daily. While the morning session reference price would be previous day’s closing price, volume weighted average market price would be reference price for afternoon session.
- Every block deal must result in delivery of shares and cannot be squared off or reversed, promoting genuine transfer of ownership.
Enhancement of order size seeks to divert smaller trades to the regular cash market, aiming to reduce manipulation risks in large trades and mirror the scale observed in today’s markets. SEBI’s revisions are therefore intended to foster greater market transparency, reduce trade manipulation risks, and bring India’s block deal regulations in line with the evolving realities of the capital markets.
3.3 SEBI is looking to regulate the grey or parallel market, where shares of unlisted companies such as NSE, Chennai Super Kings, Cochin International Airport and Mohan Meakins are traded unofficially.
- The proposed move will facilitate price discovery for unlisted companies before their shares are officially launched for trading on the bourses and will also boost tax income for the government.
- This comes at a time when India has emerged as one of the top IPO markets globally, with $2.8 billion raised in Q1 of this year despite global economic uncertainties.
Pre-listing information is often insufficient for investors to make an investment decision. This pilot initiative for a regulated venue where pre-IPO companies can choose to trade, subject to certain disclosures would be a welcome move. India’s grey market has operated for years with no oversight.
3.4 SEBI has floated consultation paper for bringing changes in IPOs.
- Proposed a five-slab structure for IPOs, replacing the earlier broad thresholds, to ease execution risks for mega listings.
- For issuers above ₹50,000 crore market cap, minimum public offer (MPO) sizes and equity dilution norms have been lowered — e.g., 8% for ₹50,000 crore–₹1 trillion, 2.75% for ₹1–5 trillion, and 1% (with a 2.5% floor) for above ₹5 trillion.
- Larger issuers get more time to meet 25% minimum public shareholding — up to 10 years for issuers above ₹1 trillion.
- Retail quota remains unchanged at 35% for all IPOs, reversing an earlier proposal to reduce it for large issues.
SEBI’s rationale rests on challenges for markets to absorb very large IPOs as forced rapid dilution can depress stock prices even for fundamentally strong companies.
Sebi’s new framework eases dilution and compliance timelines, making mega IPOs more practical while retaining retail participation. This balances the twin objectives of facilitating mega listings and safeguarding market stability. The changes aim to attract large listings without straining market absorption.Top of FormBottom of Form
3.4 SEBI has floated a consultation paper for easing compliance for RIAs.
The Registered Investment Advisors [RIA] model, introduced in 2013, has struggled to scale, with numbers falling from ~1,300 to 967. Key changes proposed
- Graduates from any discipline may now apply; reliance placed on rigorous NISM X-A/X-B exams to ensure quality.
- RIAs may disclose past returns on client request if certified, with Past Risk and Return Verification Agency (PaRRVA) providing standardized, regulator-approved disclosures in future.
- Permission to charge for second-opinion advisory services on portfolios retained with distributors/banks.
- Higher client caps, lower net-worth norms, simpler qualification requirements, removal of experience rule.
While regulatory barriers are lowered, skill depth remains critical. Advisory requires consulting expertise, empathy, and structured processes—often absent in fresh graduates. SEBI’s changes mark a clear shift toward institutionalising fiduciary advisory services by removing entry barriers and expanding permissible activities, while still leaving critical reforms—advertising flexibility and scalable fee collection—open for future action.Top of FormBottom of Form
# 4 Economy
4.1 Govt has unveiled a sweeping GST reform blueprint—a move that could redefine affordability, demand, and competitiveness across sectors.
Pros
- Moves from a complex four-slab system to just two main rates: 5% (for merit goods) and 18% (for standard items), plus a high 40% rate for sin/luxury goods. Post this change, 99% of items currently taxed at 12% would move to the 5% bracket, while 90% of goods in the 28% slab would drop to 18%. Far less complicated than the earlier slabs thus reducing classification disputes and make compliance easier for businesses.
- Most items in the current 12% slab will shift to 5%, while nearly 90% of goods under the 28% will move to 18%. This means lower prices for essentials like packaged foods, medicine, appliances, electronics, small cars, and insurance premiums, benefitting middle-class and low-income households.
- By making products more affordable, the reforms aim to spur demand, push household spending, and thereby promote economic growth. Estimates suggest nominal GDP growth could rise by 0.6% due to these GST cuts.
- The proposal includes technology-driven measures like pre-filled returns, automated refunds, and streamlined registration processes, reducing costs and burdens for small businesses.
- Introduction of a 40% slab for sin goods (like tobacco, luxury cars, online gaming) is expected to offset some revenue losses from reduced rates on regular goods.
Cons
- Estimated to cost the central exchequer up to ₹85,000–₹100,000 crore annually, risking funds for welfare schemes and infrastructure projects, with limited compensation mechanisms for states.
- No clear mechanism yet for compensating states for revenue shortfall after the end of compensation cess, leading to fiscal concerns.
- While the overhaul may cushion large-scale GDP, specific industries hit by tariffs (e.g., textiles, gems, chemicals) may not benefit, as GST reductions cannot fully compensate for sector-specific losses.
- Concerns persist on whether insurers, retailers, and manufacturers will pass on tax cuts to consumers rather than absorbing them in margins.
The reforms in simple terms are therefore anchored on three pillars –
- rate rationalisation (fewer slabs, lower rates on essentials),
- structural reforms (addressing inverted duty structures – where inputs are taxed higher than outputs like synthetic fibre (18%), yarn (12%) and final cloth (5%)
- and ease of living (automation of registrations, prefilled returns etc.).
Effect of these reforms would be lower cost of living for households, improved competitiveness for business and potential consumption revival for economy with fiscal risks. SBI estimates that for every rupee of GST revenue foregone, consumption gets multiplied by 2.3 times. If executed well, these reforms could be a defining milestone in India’s economic trajectory.
4.2 As per S&P Global report released last week
- HSBC Flash India Composite PMI Index reached 65.2 in August compared to 61.1 in July and 60.7 year ago.
- Service sector index touched its highest level at 65.5
- Manufacturing PMI improved to 59.8 from 59.1 in July
- New international orders rose at the fastest pace since 2014, with survey respondents citing increased demand from customers across Asia, West Asia, Europe and the US
- On the employment front, the job growth rate exceeded the long-term average as faster hiring in services offset a slight slowdown among goods producers.
It’s noteworthy that Manufacturing PMI reached its highest reading since January 2008 while Service PMI reached its highest level since the survey began in Dec 2005. This positive outlook is supported by favourable demand prospects, according to anecdotal evidence. We only hope that this vibrancy manifests in GDP growth.
4.3 As per data released by the Govt last week
- India’s core sector output grew 2% YoY in July, down from 6.3% last year and slightly lower than 2.2% in June, dragged by contractions in coal (-12.3%), natural gas (-3.2%), crude oil (-1.3%) and refinery products (-1%).
- Strength came from steel (+12.8%) and cement (+11.7%), supported by government capex and housing demand. Fertilisers grew 2%, electricity 0.5%.
- Muted energy demand, stable crude prices, and EV adoption weighed on hydrocarbons, while strong infra and housing activity lifted construction-linked sectors.
(Core sector = 40% of IIP; June industrial output was at a 10-month low of 1.5%.)
4.4 The new announcement by US on August 29, to end de minimis tax exemption on imports below $800 from August 29 has serious consequences.
- India–US ecommerce shipments may fall 15–25%. Small and mid-sized exporters of handicrafts, jewellery, textiles, and home décor most affected.
- Roughly 40% of India’s shipments to the US flow through this channel, impacting sellers, marketplaces, logistics, and payment firms.
- Estimated 4–6% of India’s goods exports to the US directly hit; software exports (≈50% of trade) remain unaffected.
Cross-border payment players (Skydo, BriskPe, PayGlocal) may shift focus to larger exporters amid tighter RBI oversight.
# 5 PE/VC
5.1 ICAI is set to introduce new Information Systems Audit Standards to strengthen audit quality for tech-driven entities such as startups, fintech’s, and e-commerce firms.
- Standards will extend beyond financial audits, covering IT-related risks like cyber threats, data breaches, and system failures across all sectors using digital platforms, ERPs, and cloud systems.
- Provide a structured framework to evaluate IT system integrity, confidentiality, and availability; align with laws such as India’s DPDP Act and global norms like GDPR.
- Enables chartered accountants to deliver value-added services in IT governance, cyber reviews, fraud detection, ERP audits, and compliance advisory.
India’s startups count at 1,57,706 in 2024 (from 502 in 2016) and projected growth of fintech sector from $110 bn (2024) to $420 bn (2029), heightens the need for robust system audits. The standards therefore signal a decisive shift—moving audits from traditional financial focus to integrated tech-risk and governance assurance, equipping auditors to remain relevant in India’s rapidly digitising economy.
5.2 Key Features of the Online Gaming Bill, 2025 approved by Parliament
The Act enforces a complete prohibition on offering, operating, facilitating, advertising, or promoting online games involving monetary transactions, regardless of whether they are skill-based or chance-based. This includes banning advertisements and prohibiting banks or payment platforms from processing any related transactions. Bill marks formal entry of state into monetised virtual entertainment. Key features
- Esports (like Fortnite and Call of Duty) are formally recognised as competitive, skill-based activities and will receive support through infrastructure, events, academies, and integration into sports policy
- Online social and educational games will be promoted through registration, support for safe, culturally aligned development, and institutional backing
- Offenders facilitating money games may face up to 3 years’ imprisonment and fines up to ₹1 crore; repeat offenders may face 3–5 years’ jail and up to ₹2 crore fines
- Advertising violations carry penalties up to ₹50 lakh or two years’ imprisonment.
- Licensed platforms must implement age and identity verification, self-exclusion features, time and deposit limits, data protection, and grievance mechanisms
- The legislation replaces fragmented, state-level regulations with a centralised, uniform regime intended to support innovation while mitigating risks
Benefits
- By targeting predatory real-money gaming, the law aims to reduce addiction, financial distress, and even suicides associated with these platforms
- The law addresses concerns over money laundering (due to cross border nature of many platforms with complex offshore structures) and terror financing linked to online gaming, adding layers of oversight to financial misconduct.
- A single, consistent regulatory framework will reduce operational uncertainties (previously caused by fragmented state laws) and may encourage ethical, sustainable investment.
Market impact
- After weathering the 28% GST shock in 2023, the online gaming sector — which has raised over $3 Bn across ~400 companies, is projected to reach $15 Bn by 2033, generated ~$2.5 Bn revenue in FY24, and created 2 Lakh+ tech jobs — now faces an existential question.
- Historically, the Public Gambling Act (1967) enabled the industry to flourish by classifying real-money gaming under the “skill” category. Courts consistently upheld games like rummy and fantasy sports as skill based.
- The new bill nullifies all precedents, treating all monetized games alike — irrespective of skill or chance. It explicitly targets “online money games”, defined as those where users pay fees or deposit funds expecting monetary returns.
- The abrupt ban has forced leaders like Dream11, MPL, Zupee to shut real-money operations, triggering revenue losses and job cuts. Listed players such as Nazara Tech and Delta Corp saw sharp stock declines, with broader concerns about deterring billions in future investment.
This development is not a simple case of government overreach or industry collapse. It reflects competing priorities, unintended consequences, and the challenge of regulating fast-evolving digital markets — raising deeper questions on how societies govern technology and innovation.