# 1 Markets
1.1 Indian equities witnessed a sharp risk-off correction, with the Nifty falling below 24,000 to 23,548 and the Sensex closing at 74,776 amid heightened volatility, MSCI Index rebalancing, and heavy FII selling, including a ₹20,637 crore single-day outflow. For May, the Nifty and Sensex slipped 1.9% and 2.8% lower, respectively. Markets were pressured by persistent West Asia-related geopolitical uncertainty, crude oil volatility, raising fears over inflation, the rupee, and economic growth. Despite the sell-off, strong domestic institutional liquidity and mutual fund cash reserves provided support.
1.2 US equity benchmarks surged to fresh record highs—with the S&P 500 (+1.43%) logging its ninth consecutive weekly gain and the Nasdaq rising 2.39%—driven by blockbusting technology earnings like Dell and cooling Treasury yields. Optimism surrounding a potential 60-day US-Iran ceasefire extension heavily fueled a broad-based, risk-on rally,
1.3 The benchmark India 10-year G-Sec yield edged lower to hover near 6.90%, supported by a sharp retreat in Brent crude prices and softening US Treasury yields following progress in US-Iran ceasefire extensions. US Treasury yields fell sharply across the curve, with the benchmark 10-year yield dropping below 4.20%, as cooling inflation markers and signs of progress in US-Iran peace talks fueled strong investor demand for safe-haven debt.
# 2 RBI/Banking
2.1 RBI Annual Report FY26: Key Highlights
- Financial sector remained resilient with strong capital buffers, improved asset quality and multi-decade low GNPA levels.
- Bank credit growth accelerated to 15.9% (vs 10.9% in FY25), outpacing deposit growth. Higher share of EBLR-linked loans improved monetary policy transmission.
- Bank RoA expected to moderate to 1.15–1.20% in FY27 from ~1.3% due to lower treasury gains and higher ECL-related provisioning.
Bank Frauds
- Fraud amounts rose 46% to ₹48,021 crore, while cases fell sharply to 10,114 (from 23,722).
- Loan/advances frauds accounted for 85% of total fraud value (₹40,774 crore).
- Digital payment frauds dropped significantly due to stronger authentication and payment safeguards.
- RBI is exploring a ‘kill switch’ to instantly block all fraud-account debits and strengthening cyber-resilience frameworks.
RBI Finances
- Forex transaction gains surged 52% to ₹1.69 lakh crore, aided by record dollar sales to manage rupee volatility.
- Record ₹2.87 lakh crore surplus transferred to the Government;
Reserves
- Forex reserves stood at $691 billion, covering ~11 months of imports and ~90% of external debt. Strong reserves and moderate external debt continue to support macroeconomic stability.
Growth & Inflation Outlook
- RBI projects GDP growth at 6.9% in FY27 (vs 7.6% estimated for FY26).
- Key risks: prolonged West Asia conflict, higher oil prices, supply-chain disruptions and global uncertainty.
- Bond yields could face upward pressure from oil-price shocks, though fiscal consolidation and RBI liquidity support may cushion the impact.
Banking system remains robust with strong balance sheets and credit growth, but rising large-ticket loan frauds, cyber risks and geopolitical uncertainties are key areas of concern.
2.2 RBI’s New Credit Rating Framework (Effective Apr 2027) – Key Takeaways
What Changes?
- RBI will link banks’ capital requirements not only to borrower ratings but also to the historical default performance of rating agencies.
- Banks will need to hold higher capital against loans rated by agencies with weaker default track records.
- Loans to borrowers marked Issuer Not Cooperating (INC) for over six months will attract higher risk weights, raising borrowing costs.
Impact on MSMEs
- MSMEs could face tighter credit access and higher borrowing costs, especially those relying on smaller or regional rating agencies.
- Greater scrutiny may make rating agencies more conservative, potentially reducing credit availability for weaker borrowers.
Impact on Credit Rating Agencies
- Large agencies such as CRISIL, ICRA and CARE are likely to benefit as banks may prefer ratings from agencies with stronger historical performance.
- Smaller agencies (e.g., Brickwork, Infomerics, Acuite, Acer) could face competitive pressure and loss of market share.
Concerns
- RBI measures defaults by number of borrowers, not value of defaults.
- This may disadvantage smaller agencies that rate a larger pool of MSMEs and inherently riskier borrowers.
- A small MSME default counts the same as a large corporate default, potentially skewing default-rate calculations.
While the framework strengthens risk discipline and aligns India with global Basel standards, it may inadvertently tighten credit access for MSMEs and further concentrate the credit-rating industry in favor of larger agencies.Top of Form
2.3 Bottom of Form
Bottom of Form
gOgOg Govt. last week has introduced a single online platform last week to help citizens trace unclaimed financial assets across banks, insurance companies, mutual funds, shares, and dividends.
- The portal consolidates multiple asset-search systems into a single access point, simplifying claims and reducing fragmentation.
- Developed with the PSB Alliance, it supports the “Your Money, Your Right” campaign by improving awareness, transparency, and recovery of dormant assets.
- The move targets over ₹1.08 lakh crore of unclaimed funds lying across financial institutions.
Expected to improve financial inclusion, assist senior citizens and legal heirs, and strengthen trust in the financial system under the Viksit Bharat 2047 vision.
2.4 As per CRISIL report released last week,
- Indian banks’ RoA is expected to decline to 15–1.20% in FY27 from ~1.3% in FY26, mainly due to lower treasury income and higher pre-emptive provisioning ahead of the Expected Credit Loss (ECL) framework.
- Despite the decline, RoA will remain well above the sector’s 20-year average of 0.8% and 10-year average of 0.6%.
- Treasury gains are likely to fall by 5–10 bps from 1.2% last year, as bond yields rise and mark-to-market gains normalize after last year’s yield-driven windfall.
- Provisions may increase by 5–10 bps, though remaining benign at below 0.5%, driven by precautionary provisioning before the ECL regime becomes effective from April 1, 2027.
- Net Interest Margins (NIMs) are expected to hold at around 2.9%, despite some moderation from FY26 exit levels.
- Higher provisions are not linked to deterioration in asset quality; credit costs are expected to stay contained.
While profitability is expected to moderate modestly due to normalising treasury gains and higher precautionary provisioning, Indian banks remain well-positioned with stable margins, healthy asset quality, and earnings metrics comfortably above historical averages.
# 3 SEBI
3.1 SEBI Proposal on tightening Oversight of IPO & Equity Fund Utilisation- Key Proposals
- SEBI plans to strengthen monitoring of how companies deploy funds raised through IPOs, rights issues, preferential allotments and QIPs.
- Mandatory monitoring threshold proposed to be lowered from ₹100 crore to ₹50 crore, bringing more issuers under scrutiny.
- Credit rating agencies (monitoring agencies) get enhanced powers for tracking end-use of funds.
- Monitoring reports to be submitted directly to stock exchanges and non-cooperative companies to be explicitly flagged. Proposed penalty of ₹50,000 per violation for issuers obstructing monitoring activities.
Rationale
- Improve transparency, accountability and investor protection in the use of public money.
- Address current gaps where monitoring agencies often face limited access to information and reports are not widely disclosed.
- Prevent misuse/diversion of funds raised from public markets.
Potential Impact
- Increased compliance burden and disclosure requirements for issuers.
- Greater visibility for investors on utilisation of IPO proceeds and capital allocation.
- Particularly relevant as 190 companies are in the IPO pipeline seeking to raise about ₹2.5 lakh crore, making stronger oversight crucial for sustaining fundraising momentum.
SEBI is shifting from merely monitoring fund utilisation to actively enforcing accountability, aiming to make capital raising more transparent and investor friendly.
3.2 Top of Form
SEBI last week rolled back key parts of its January 2025 nomination overhaul for demat accounts and mutual fund folios
- Maximum nominees remain capped at three, reversing the earlier proposal to increase the limit to 10 nominees per account/folio.
- Video-based opt-out requirement scrapped; investors can continue to opt out of nomination through a simple online or offline declaration.
- Nominee documentation requirements significantly except for the nominee’s name and relationship with the investor are mandatory; other details are optional.
- SEBI has dropped provisions that would have enabled nominees to operate accounts of incapacitated investors under the proposed framework.
SEBI has adopted a more pragmatic approach, balancing the objective of reducing unclaimed assets with ease of compliance and smoother investor onboarding.
3.3 SEBI Proposal to Tokenise Corporate Bonds – Key Takeaways
- Bonds could be represented as digital tokens and traded electronically using Distributed Ledger Technology (DLT)/blockchain.
- A likely structure could involve a trustee holding the bond and issuing corresponding digital tokens to investors.
Technology
- Tokenisation converts a real-world asset into a digitally tradable token.
- India already uses blockchain-based systems via NSDL and CDSL for monitoring security creation and covenant compliance in corporate bonds.
Potential Impact on Corporate Bond Market
- India’s corporate bond market remains institution-dominated, with limited retail participation.
- Tokenisation can reduce minimum investment sizes significantly; enable fractional ownership of bonds; Improve accessibility and broaden the investor base.
- Example: A ₹1 lakh bond could potentially be divided into ₹1,000 tokens.
- Liquidity is unlikely to improve immediately but could strengthen gradually as more retail investors enter the market.
- Wider investors reach beyond institutional buyers.
- Effectiveness will depend on low tokenisation costs, meaningfully reduced ticket sizes and easy availability across investment platforms
Tokenisation could be a significant structural reform for India’s corporate bond market by enabling fractional ownership, lowering investment thresholds, and attracting retail investors, though its success will depend heavily on the final regulatory framework and ease of adoption.
3.4 NCDEX is planning to introduce rainfall-linked derivatives based on Mumbai’s rainfall patterns.
- Financial markets gradually evolved to price and trade different forms of risk, leading to the emergence of weather derivatives globally, pioneered in part by Enron.
Rationale
- Weather has a direct impact on agriculture, energy demand, logistics, productivity, and business revenues.
- With India suffering an estimated $180 billion in weather-related losses over the past three decades, businesses need tools to hedge climate-related financial risks.
Key Features of the Proposed Rainfall Derivative
- Proposed contract: RAINMUMBAI, linked to Mumbai’s rainfall.
- Uses Mumbai’s historical Long Period Average (LPA) rainfall (~2,206.7 mm) as the benchmark.
- Contract payouts depend on deviations of actual rainfall from the historical average:
- Above-average rainfall → positive deviation.
- Below-average rainfall → negative deviation.
Potential Benefits
- Provides a financial cushion against monsoon variability and extreme weather events.
- Helps insurers, utilities, commodity players, and weather-sensitive businesses manage earnings volatility.
Concerns & Challenges
- Rainfall is highly localized; city-wide data may not reflect actual losses experienced by businesses.
- Success depends on trusted, transparent, and tamper-proof weather measurement systems.
- Signals a shift where climate change is increasingly viewed not just as an environmental issue but also as a financial and risk-management challenge.
Rainfall derivatives are not really about “trading rain”; they are about pricing, hedging, and managing climate-related financial risk as weather volatility becomes a larger economic reality.
3.5 MCA permits CSR investments via Social Stock Exchanges:
- Companies can now deploy up to 10% of their annual CSR spending through Zero Coupon Zero Principal (ZCZP) instruments issued by not-for-profit organisations listed on recognized Social Stock Exchanges (SSEs).
- The move is expected to address the key challenge of insufficient investors/buyers on SSEs, improving fundraising opportunities for social enterprises.
- The regulated, market-linked mechanism is expected to improve tracking, governance, impact measurement, and ESG alignment of CSR investments.
The amendment marks a significant step toward deepening India’s Social Stock Exchange ecosystem by channeling a portion of the country’s sizeable CSR pool into structured, transparent, and impact-focused social financing.
# 4 Economy
4.1 Last week the government removed the restrictions under Scheme for Financing Viable Infrastructure Projects [SIFTI] on IIFCL, ending the 20% project-cost lending cap and giving the institution greater operational and financing flexibility. SIFTI was launched by Govt. to enable IIFCL to provide a long-term financing for commercially viable infra projects.
- IIFCL can now finance larger infrastructure projects, expand into sectors such as social infrastructure, healthcare, and urban development, and introduce new lending products.
- The move effectively reduces dual regulatory constraints, enabling IIFCL to play a bigger role in India’s infrastructure financing ecosystem.
- IIFCL aims to disburse ₹1 lakh crore over the next three years, targeting ~20% growth in loan disbursements and ~30% growth in loan sanctions in FY27.
The policy is expected to accelerate infrastructure investment, improve project execution, and support India’s infrastructure-led growth agenda.