# 1 Market
The Indian market fell sharply last week as US tariff increases and heavy FII selling weighed on sentiment. Sensex dropped 1.8% to around 79,810 and Nifty slipped nearly 1.8% to 24,427, with midcaps and small caps underperforming. Volatility increased and technical signals remained weak. Next week is expected to be volatile, with index recovery dependent on global events and liquidity. Sector rotation may favour select midcaps and PSU banks.
Indian 10-year yields climbed to 6.61%, the highest since March, amid fiscal worries, heavy bond supply, and muted demand. Expectations of further RBI cuts have faded, while FPIs stayed cautious ahead of auctions, keeping sentiment fragile.
US equities slipped from record highs late last week on tech losses and inflation concerns, though August closed with solid gains across indices. The S&P 500 fell 0.6% Friday, the Nasdaq lost 1.0%, and the Dow eased 0.2%, pressured by profit-taking and weak results from AI names such as Nvidia and Dell. Despite the pullback, the Dow rose ~3% in August, the S&P 500 nearly 2%, and the Nasdaq ~2%—the longest winning streak in over a year. Strong earnings and expectations of a September Fed rate cut underpinned sentiment, though September’s historical weakness keeps investors cautious.
US 10-year yields edged up to ~4.23% last week on lingering inflation worries, pushing bond prices lower despite Fed cut hopes. Japan’s 10-year climbed past 1.62%, its highest since 2008, as markets priced further rate hikes.
# 2 RBI
2.1 Key highlights from RBI’s Q1FY26 corporate sector performance assessment published last week:
- Sales: Overall sales up 5.5% y-o-y (vs. 7.1% in Q4FY25); manufacturing slowed to 5.3% (dragged by petroleum), IT to 6.0%, non-IT services to 7.5% (vs. double-digit earlier).
- Expenditure: Manufacturing raw material costs rose 4.5% y-o-y (slower pace; ratio down to 54.1% from 55.2%); staff costs rose 5.8–8.3%, pushing staff cost-to-sales ratios slightly higher.
- Profitability: Operating profit growth slowed in manufacturing (6.9%) and non-IT services (11.3%) but improved for IT (5.4%); margins stable in manufacturing, up in IT, down in non-IT services.
- Leverage: Manufacturing Interest Coverage Ratio [ICR] improved to 9.1 (from 8.7); non-IT services stable; IT remained at elevated ICR levels.
Despite capacity utilisation reaching 77 per cent and an improved interest coverage ratio on a deleveraged balance sheet, private investments remain subdued, constraining the broad-based growth that India requires.
2.2 Highlights from RBI’s Quarterly Basic Statistical Return (BSR-2), Q1 FY 2026.
- Deposits registered a y-o-y growth of 11.3% as of the end of June 2025.
- Deposits growth of public sector banks and private sector banks stood at 10.2% and 12.4%, respectively, in June 2025; whereas their corresponding shares in deposits were hovering at 57.3% and 36%, respectively.
- Term deposits recorded a y-o-y growth of 13.5% significantly outpacing the saving deposits growth of 5.4%.
- Share of term deposits in total deposits increased to 62.2% from 61% last year. Senior citizens owned 20.4% of the total deposits as at end-June 2025.
- ~70 per cent of term deposits accounted for original maturity bucket of 1-3 years, whereas around 20 per cent of term deposits were short-term deposits with maturity of less than one year.
- Credit growth decelerated from15.3% to 11.1% y-o-y with private sector banks growth slowing sharply to 9.5%.
- Personal loans continued to grow faster than overall credit, gradually increasing their share to 32 per cent of total credit by June 2025; within personal loans, housing loans accounted for more than the half.
- The share of individuals in total credit rose to 47.2% in the reporting quarter, up from 46.5% in Q1FY2025.
- Growth in credit to female borrowers continued to outpace that of male, lifting women’s share within credit to individuals to 23.7 per cent from 23.4 per cent in Q1FY2025.
- The share of industrial credit in total credit declined marginally to 23.3 per cent in Q1FY26 from 23.8 per cent a year ago; its growth y-o-y slowed to 7.6 per cent in Q1FY2025 from 11.3 per cent a year ago.
- With easing of repo rate, the share of loans bearing interest rates below 9 per cent increased to 54.1 per cent in June 2025, from 43.2 per cent in the previous year.
Robust deposit growth underscores sustained confidence and liquidity in the banking system as the economy entered FY 26. However, the shift from industrial credit to personal loans signals an imbalance—consumer lending is expanding, while productive investment in industry lags, which does not bode well for long-term economic growth.
2.3 Key takeaways from the “State of the Economy” article in the RBI Bulletin dated August 28, 2025:
- Economy is resilient, with support from benign financial conditions, ongoing transmission of earlier rate cuts, supportive fiscal measures, and improving household sentiment.
- Favourable monsoon and improved kharif sowing have boosted agricultural output, supporting rural demand in the second half of the year.
- Industrial activity remains mixed, with expansion in manufacturing and sustained momentum in services, though electricity and mining lag.
- Uncertainties around India–U.S. trade policies and new tariff actions are identified as a downside risk to aggregate demand (50% tariff on Indian exports came into effect Aug. 27)
- Near-term inflation is more benign than previously anticipated. average headline inflation in FY26 is expected to remain significantly below target.
- Due to rate cuts, public sector banks lowered weighted-average lending rates by ~77 bps (fresh loans) and ~41 bps (outstanding), while private banks reduced by ~46 bps and ~32 bps, respectively.
- The recent S&P sovereign rating upgrade is expected to improve capital inflows and positively affect sovereign yields.
The RBI is optimistic about domestic demand holding up but is cautious about downside risks from global uncertainties and trade tensions with the US. Monetary policy will remain vigilant, adapting to incoming economic data to maintain stability.
2.4 Fitch affirmed India’s sovereign rating at ‘BBB-’ with stable outlook, projecting 6.5% GDP growth in FY26, well above the ‘BBB’ median of 2.5%.
- The agency cited India’s strong growth record, fiscal credibility, and robust external finances as key supports.
- Fitch noted GST reforms, fiscal consolidation, and infrastructure spending could sustain momentum toward Viksit Bharat 2047 despite near-term growth moderation
- It flagged risks from elevated debt (80.9% of GDP in FY25, rising to 81.5% in FY26) and lagging structural metrics such as governance and per capita income.
The rating affirmation follows S&P’s upgrade of India to ‘BBB’ earlier in August, its first in 18 years.
2.5 Brief highlights from S&P Global report released last week
- Four of the top six Indian banks reported a decline in net income in Q1 FY26, largely due to RBI’s 100 bps policy rate cuts since Jan 2025.
- Liquidity comfortable as RBI cut CRR by 100 bps to 3%, releasing ~₹2.5 lakh crore liquidity by Dec 2025.
- Slight deterioration in asset quality, higher provisioning though NPAs remain at multi-year lows.
- Banks expect NIM improvement in H2 FY26 as the rate environment stabilises.
- Profitability
- Net profit – SBI ₹21,201 cr. (+9.7% YoY); ICICI Bank: ₹13,558 cr. (+15.9% YoY).
- HDFC Bank, Axis Bank, Bank of Baroda, and Punjab National Bank reported lower profits.
- NIM fell at 3.94% (vs. 4.06%) in HDFC Bank; at 2.43% (vs. 2.76%) in PNB and 2.77% (vs.2.99%) in SBI,
Indian banks faced profit and margin pressures in Q1 FY26 due to RBI’s steep rate cuts, though SBI and ICICI Bank stood out with resilient earnings. With ample liquidity support and stable asset quality, lenders expect net interest margins to recover in the second half of the year.
# 3 SEBI
3.1 SEBI last week granted additional extension to market participants to comply its earlier order issued in July 2025 from 30th August 2025 to Sept 30, 2025.
- The compliance requirement is to make digital platforms accessible for persons with the Rights of Person with Disability Act and following a Supreme Court ruling recognising digital access as a fundamental right.
- In line with the extension time for first accessibility audits also extended to 30th April 2026 and full compliance extended to July 31, 2026.
- SEBI also modified reporting structure for Investment Advisors and Research Analysts to BSE only instead of BASL and SEBI while other market infra institutions would report directly to SEBI.
Sebi’s extensions strike a balance between regulatory intent and operational feasibility—the mandate upholds inclusivity as a fundamental right in financial services, but staggered deadlines give market entities time to build capacity, standardise accessibility audits, and institutionalise compliance.
3.2 SEBI in its draft consultation paper dated 25th August 2025 proposed incentives for First-Time Female Mutual Fund Investors. SEBI is exploring:
- Incentives for distributors to onboard firsttime women investors.
- Simplification of compliance for AMCs (e.g., reduction in filings).
- Review of mutual fund scheme categorization for clarity and innovation.
These proposals reflect a progressive stance toward financial inclusion, targeting historically underserved demographics. However, the effectiveness of such incentives hinges on robust implementation and ensuring that inclusion is meaningful—not merely numerically driven.
# 4 Economy
4.1 Key datapoint takeaways from India’s GDP (Q1FY26) release by the Government on 29 August 2025
- Real GDP Growth: +7.8% (year-on-year), up from 6.5% in Q1 FY25, and higher than 7.4% in Q4 FY 25
- Nominal GDP Growth: +8.8%, with nominal GDP rising to ₹86.05 lakh crore from ₹79.08 lakh crore in Q1 FY 25
- Real GVA (constant prices): Six quarter high of +7.6%, increasing to ₹44.64 lakh crore from ₹41.47 lakh crore
- Primary Sector (Agriculture & Allied): +3.7% (↑ from 1.5% last year)
- Manufacturing: +7.7%
- Tertiary Sector (Services): +9.3%, up from 6.8% yearonyear
- Demand-Side Contributors
- Government Final Consumption Expenditure (GFCE): +9.7% (nominal) vs. 4.0% last year
- Private Final Consumption Expenditure (PFCE) (real): +7.0%, down from 8.3%
- Gross Fixed Capital Formation (GFCF) (investment proxy): +7.8%, up from 6.7%
This quarter marks the strongest GDP growth in five quarters despite U.S. imposition of 50% tariffs (up from 25%). Consumption was supported by the rationalisation of income tax slabs, easing food inflation, a favourable monsoon, and recent RBI rate cuts.
The services sector was the standout performer, expanding 9.3% in the June quarter, a two-year high, compared with 7.3% in the previous quarter and 6.8% in the year before. Low price deflators due to lower inflation had contributed to the high growth number.
Interestingly, the share of exports in GDP has remained unchanged at 20.9%, which hence does not indicate any frontloading of exports to the US in this period.
4.2 As per EY report released last week
- India would become 2nd largest economy with India’s GDP (PPP) projected at $20.7 trillion by 2030, rising to $34.2 trillion by 2038
- Already 3rd largest economy in PPP terms ($14.2T, FY25); expected to be 3rd largest in market exchange rate terms by 2028.
- High savings & investment rates, favourable demographics, young skilled workforce, sustainable debt profile, and rising tech capabilities quoted as drivers.
- Tariff Impact: New 50% US tariffs on ~$48B Indian exports (textiles, gems & jewellery, shrimp, leather, machinery). Potential GDP impact 0.3%, reducible to ~0.1% (10 bps) with countermeasures.
- Resilience: India’s strength lies in domestic demand and diversification of exports, helping withstand global uncertainties.
India’s trajectory towards becoming the world’s 2nd largest economy remains intact, with tariff shocks manageable through policy countermeasures and domestic demand strength.Top of FormBottom of Form
4.3 As per data released by Govt. of India last week
- Industrial output (IIP) rose 3.5% YoY in July, a 4-month high (vs 1.5% in June, 4.7% in July 2024).
- Manufacturing: +5.4% (6-month high), with 14/23 industry groups growing; strongest in electrical equipment (+15.9%), basic metals (+12.7%), and non-metallic mineral products (+9.5%).
- Mining: –7.2% (drag from monsoon, weak power). Electricity: +0.6%.; Infra/construction goods: +11.9% (21-month high). Capital goods: +5% (investment activity, largely public capex). Consumer durables: +7.7% (pre-festive stocking).
India’s industrial output climbed to a four-month high in July, powered by manufacturing strength and a sharp surge in infrastructure goods, though mining and electricity remained weak. Sustained momentum hinges on public capex and festive demand, with private investment and global trade headwinds still constraining a broader recovery.
4.4 Highlights from Annual Survey of Industries (FY24) covering all the registered factories and large establishments with > 100 employees released last Wednesday.
- Gross Value Added (GVA) of domestic factories jumped 11.9% to ₹24.58 trillion in FY24 (vs. ₹21.97 trillion in FY23).
- Employment rose 5.92% to 19.5 million in FY24 (vs. 18.4 million in FY23).
Over the last decade (2014–24), industries added 5.7 million jobs.
- Invested Capital increased to ₹68.01 trillion in FY24 (vs. ₹61.39 trillion in FY23).
- Leading states in terms of no. of factories: Tamil Nadu, Gujarat, Maharashtra, Uttar Pradesh, Andhra Pradesh.
India’s industrial sector delivered a sharp rebound in productivity and employment in FY24, reflecting both capacity expansion and efficiency gains. Sustained capital formation and concentration of growth in key states and industries signal resilience but continued momentum will hinge on deepening productivity gains beyond the top clusters.Bottom of Form
# 5 PE VC
5.1 Startup Policy by Delhi Govt.
Brief highlights of the draft policy as unveiled last week. Policy aims to transform the city into global innovation hub with 5000 startups by 2035.
- The state offers incentives, including reimbursement on co-working lease rentals (up to ₹10 lakh annually for three years), patent filings, exhibition participation and monthly operational grants of ₹2 lakh for a year.
- plans to establish a ₹200 crore startup venture capital fund to provide access to finance to startups in the city.
- Delhi has a large concentration of startups, making the city one of the biggest and most active startup innovation hubs in the country. As of January, India had over 161,000 startups recognised by the department for promotion of industry and internal trade.
- A dedicated policy certainly could address gaps in funding access, infrastructure and regulatory support. It may also help attract investors, talent and global partnerships.
Key gaps & risks
- Overlap with Centre schemes unless tightly integrated.
- SISFS (₹945 crore) and SIDBI FFS (₹10,000 crore, with >₹22,000 crore downstream invested by AIFs as of Mar-2025) already fund seed/VC via incubators/AIFs. Delhi must clarify where its fund sits in the stack (e.g., co-GP/sidecar with AIFs, or gap-stage that SISFS/FFS do not cover).
- Implementation credibility.
- Delhi’s 2019/2022 efforts stalled; the execution burden (screening, disbursal, audits, grievance redressal) is non-trivial. Without time-bound SLAs, independent investment committees, and a public dashboard, delivery risk is high.
- Ecosystem realism.
- To “outpace Bengaluru/Mumbai”, capital alone will not suffice; infrastructure and talent density matter. Bengaluru’s current stresses illustrate why city-level enablers (mobility, housing, labs) determine productivity and firm survival. Delhi’s policy should connect to such urban-services KPIs.
A well-signalled reboot with useful instruments and inclusive intent. Success hinges on tight targeting, professional AIF-grade governance, co-investment linkages to national capital pools, and visible delivery discipline—particularly given Delhi’s prior stop-start record.