Category: Beyond

Indian companies are experiencing the most significant earnings downgrades in Asia as U.S. tariffs rise, reported Reuters, adding pressure on growth and investor sentiment. In the past two weeks, forward 12-month earnings forecasts for India’s large and mid-cap firms have fallen by 1.2%, according to data from LSEG IBES, marking the steepest revision in the region.

These revisions reflect both a weak earnings season and concern over the outlook, particularly for labor-intensive sectors like textiles and consumer goods. Although firms in the Nifty 50 derive only about 9% of their revenue from the U.S., a sustained 50% tariff could dent India’s GDP by as much as one percentage point, according to analysis from MUFG.

The sectors most heavily impacted by downward revisions include automobiles and components, capital goods, food and beverages, and consumer durables, with each seeing earnings forecasts slashed by at least 1%—underscoring a broad-based slowdown across India’s corporate landscape.

Despite these challenges, the Indian government has unveiled sweeping tax reforms designed to bolster domestic consumption. Analysts at Standard Chartered estimate these reforms could boost GDP growth by 0.35–0.45 percentage points over the fiscal year ending March 2027.

Still, India’s earnings growth has lagged, remaining in single digits for five consecutive quarters—well below the 15–25% gains seen from 2020 to 2023. Strong GDP growth has continued, averaging 8.8% between 2022 and 2024, and projected at around 6.8% annually over the next three years—but gaps persist between economic expansion and corporate performance.

The business environment’s cooling is reflected in shifting investor sentiment. Bank of America's recent fund manager survey indicates that India has slipped from the most-favored to the least-preferred equity market in Asia within a short period.

Additionally, a Reuters poll of 20 analysts reveals that India’s stock markets are expected to deliver only modest gains through year-end. The Nifty 50 is forecast to rise approximately 3.9% to around 25,834, with new record highs deferred until 2026. Meanwhile, the Sensex is projected to reach approximately 85,100 this year and climb further in 2026.

Gendering these trends, significant foreign capital has exited Indian equities—more than $13 billion year-to-date, including $2.4 billion in early August—driven by policy uncertainty and tariff-related risks.

This earnings pressure comes amidst the backdrop of rising trade tensions. Presidential tariffs of up to 50% on Indian exports have rattled markets. While Fitch Ratings has noted limited direct exposure for most Indian corporates, sectors like pharmaceuticals could face risk if tariff policies expand. The agency also warned that sustained tariffs could moderate projections for FY2026 economic growth.

India Inc. is responding with strategic adaptations. Companies are exploring international growth paths—either expanding in lower-tariff countries like the UAE and Mexico or increasing their presence directly within the U.S.—to circumvent trade barriers and preserve competitiveness.

In sum, India’s economic trajectory is being tested by external headwinds, with sharply downgraded earnings, cautious investor confidence, and modest market gains forecast amid efforts to cushion domestic demand with policy support. Balancing these dynamics will be critical in defining India’s growth resilience in an increasingly volatile global trade environment.

The Indian rupee strengthened to its highest level in August, buoyed by optimism around government-led tax reforms and easing concerns due to US tariff escalation. The currency gained 19 paise in early trade on Tuesday, opening at 87.24 and touching a high of 87.20 against the US dollar at the interbank foreign exchange market, compared with its previous close of 87.39.

Analysts said sentiment turned positive as Prime Minister Narendra Modi’s planned GST rationalisation is expected to boost consumption and economic growth. The prospect of tax cuts on essential goods, particularly in areas like mobile phones—seen as the “primary tool of digital access” for over 90 crore Indians—has lifted both investor and consumer confidence.

Global Winds and Domestic Resilience

The rupee’s rise came despite weakness in most Asian peers, pressured by climbing US bond yields. The 10-year US Treasury yield touched a two-week high on Monday, typically a dampener for emerging market currencies. Yet, the Indian unit bucked the trend, helped by foreign portfolio investors (FPIs) resuming equity purchases. FPIs bought equities worth ₹550.85 crore on Monday, propelling the Sensex up 203.44 points to 81,477.19 and the Nifty higher by 53.4 points to 24,930.35 in early trade.

Geopolitical developments also played a role. Recent talks between US President Donald Trump, Russian President Vladimir Putin, and Ukraine’s leadership have raised hopes of a peace breakthrough. “This appears to reduce the likelihood of additional tariffs or sanctions on India related to Russian oil imports,” Nomura noted in a market commentary.

Tariff Risks Still Loom

While the rupee’s performance was encouraging, economists cautioned that risks remain. A proposed 25% tariff on Indian goods by the US, set to take effect on August 27, could weigh on the outlook. Any shift in American trade policy or US Federal Reserve signals, particularly from Chairman Jerome Powell’s upcoming speech, may also sway the currency’s trajectory. The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading higher, reflecting global demand for safe assets.

Market participants said the Reserve Bank of India may have subtly intervened to stabilise the rupee at key levels. Overall, the combination of domestic tax reforms, foreign investor inflows, and easing geopolitical anxieties has given the Indian currency fresh momentum. The real test for the rupee lies ahead—its strength will be tested by shifting trade winds and the Fed’s next move.

As the Ukraine war reshaped global energy flows, India found itself at the centre of a geopolitical storm. Russian oil, once a fringe source, has become India’s lifeline—cheaper barrels that helped tame inflation, power refineries, and even boost exports. But what started as economic pragmatism has now drawn sharp fire from Washington.

Earlier this month, US President Donald Trump slapped an additional 25 per cent tariff on Indian goods, accusing New Delhi of “fuelling the war machine” by continuing to buy Russian crude. He warned of further penalties. India, however, has dismissed the charges as “unjustified and unreasonable,” stressing that Russian oil purchases are driven by necessity, not politics.

Officials at India’s public sector refiners echo that stance. For New Delhi, the bottom line is clear: energy security trumps geopolitics. Arvinder Singh Sahney, chairman of Indian Oil Corporation (IOC), emphasized this fact, “We are continuing with our crude procurement strategy based on economics. It was and continues to be a commercial exercise. Even today, there is no sanction on Russian crude…there is only a price cap, and till we honour the price cap, there is no violation by Indian refiners. We have been honouring the price cap, and there is no change in our strategy.” Hindustan Petroleum and Bharat Petroleum executives also reinforced the same point: Russian oil remains in the mix as long as it is economical.

Indeed, the recent slowdown in imports from Moscow has less to do with politics and more to do with shrinking discounts. In 2022–23, Russian barrels were available at $25–30 below Brent crude, allowing India to save an estimated $13 billion over two years. By mid-2024, however, discounts had narrowed to just $1.5 per barrel, reducing Russia’s price advantage. As a result, refiners tapped supplies from West Africa, Latin America, and even the US.

Still, Russia remains India’s top supplier. From less than 2 per cent before the war, its share surged to nearly 40 per cent by 2023. In June 2024 alone, Russia accounted for 43 per cent of India’s imports—more than Saudi Arabia, Iraq, and the UAE combined.

Payments, too, required innovation. With dollar transactions risky under Western sanctions, Indian refiners shifted to UAE-dirham settlements routed through Emirati traders. Attempts to set up a rupee-rouble mechanism failed, but the workaround has kept flows steady.

But as Russian discounts shrink and US pressure intensifies, India’s oil diplomacy faces fresh stress. The balancing act that once saved billions may soon test how far pragmatism can go in the face of power politics.

India’s indirect tax regime is headed for its biggest reset in years, and it aims to reduce the tax burden across the country. The Goods and Services Tax (GST) Council will meet in September–October to consider a two-slab structure of 5% and 18%, along with compliance reforms aimed at easing business processes and lowering taxes on daily-use items.

Such has been the buzz around this news that Monday saw both Sensex and Nifty hit new heights. The Sensex stood at 81,460.52 at 2:17 pm, up over 1%, while Nifty crossed the 25,000 in early hours of Monday. Nifty was at 24,930 at around 2:17 pm. 

Prime Minister Narendra Modi, in his Independence Day address, announced that next-generation GST reforms would be rolled out by this Diwali to lower taxes on daily-use items. The Centre will begin consultations with states in the coming weeks to build consensus on the plan.

Two Slabs and a High Sin Tax

The Centre has proposed two main GST slabs, 5% and 18%, alongside a 40% rate for sin goods such as tobacco and pan masala. Nearly 99% of goods currently taxed at 12% will move to 5%, while most products in the 28% bracket, including televisions and refrigerators, will shift to 18%.

The current compensation cess would be scrapped, replaced by the steep sin tax. Essential exemptions and special rates for bullion, jewellery, and export-oriented sectors will continue.

Boost to Consumption and Growth

Currently, 67% of GST revenue comes from the 18% slab, while 7% comes from the 5% rate. While the rejig may temporarily impact collections, officials expect lower rates to spur consumption, eventually offsetting revenue losses and supporting GDP growth.

The reforms are also designed to resolve inverted duty structures that have hurt sectors like textiles and fertilisers, while cutting litigation over product classification.

Faster Registrations, Quicker Refunds

Beyond rates, the Centre has outlined structural reforms to ease compliance:

• Business registration within three days in 95% of cases
   
• Automated refunds for exporters and sectors with inverted duties
   
• Pre-filled returns to reduce mismatches and disputes
   

After Prime Minister Narendra Modi announced plans to rationalise GST, the Congress sought an official discussion paper on “GST 2.0.” Party General Secretary Jairam Ramesh said the reform should become a “Good and Simple Tax,” noting it was a key pledge in the Congress’s 2024 manifesto.

As legislative changes are not required, the reforms can be notified once the GST Council clears them. Given the scope of the proposals, multiple meetings are expected before final approval. If consensus is reached, the new GST structure could take effect in Q3 FY25.

Indian equities opened the week on a strong note, with benchmark indices surging in early trade on Monday, August 18. Optimism around GST reforms and a landmark sovereign ratings upgrade by S&P Global fuelled the rally, while auto and banking stocks provided the thrust.

At 11 am, the Sensex jumped 950 points, or 1.18 percent, to 81,548, while the Nifty surged 385 points, or 1.56 percent, to reclaim the 25,000 level at 25,016 before coming down to 24,960 at 11 am. Market breadth was firm, with 2,342 shares advancing, 967 shares declining, and 163 shares unchanged. Mid- and small-caps also rose nearly 1 percent.

How the Market Rallies

Two major developments triggered this change. S&P Global’s upgrade of India’s sovereign rating to BBB from BBB, the first in 18 years, is expected to strengthen investor confidence and attract foreign inflows. At the same time, Prime Minister Narendra Modi’s Independence Day speech had hinted at “next-generation GST reforms” by Diwali, raising hopes of a simplified tax structure that could benefit consumption-linked sectors.

“The S&P upgrade and expectations of GST rationalisation have led to a more constructive perspective. Alongside global developments and short-covering potential, Indian markets may be entering a stronger phase,” said Devarsh Vakil, Head of Prime Research at HDFC Securities.

What the Sectoral Trends say

Autos led the rally, with the Nifty Auto index jumping 3.6 percent on reports of a possible GST cut on two-wheelers, compact cars, and hybrids. Hero MotoCorp, Maruti Suzuki, Bajaj Auto, M&M, and Tata Motors gained up to 8 percent, with Hero MotoCorp topping Nifty gainers.

Banks also paced up with this move, as the Nifty Bank index rose by 1.2 percent and private banks gained 1.4 percent. Consumer durables, metals, infra, and PSU banks traded higher, while IT and pharma stocks remained weak. Volatility edged higher, with India VIX up 2.8 percent.

Where Stock Action focuses

Vodafone Idea shot up 3 percent after reporting a narrower Q1 FY26 loss of ₹6,608 crore and a higher ARPU of ₹177. Tobacco and online gaming stocks slipped after reports of a 40 percent GST slab on sin goods, with ITC, Godfrey Phillips, Nazara Tech, and Delta Corp down up to 2 percent.

According to market analysts, Nifty faces resistance at 24,700–24,800; a breakout could trigger short covering, while a slip below 24,500 may drag it to 24,320. Trend remains sideways.

 Overall, it is anticipated that the markets may stay volatile, but GST reform hopes and global cues could drive inflows into banking and consumption sectors.

On August 18, 2025, Japan’s Nikkei 225 surged to a record high of 43,683.56, gaining 0.7 %, while the broader Topix index advanced 0.58 % to 3,125.6. The rally was largely powered by a weaker yen, which boosted exporters’ outlooks, and by strong performances from automakers such as Toyota Motor, which rose 1.58 %, and Honda Motor, which gained 1.22 %. The yen fell 0.2 % against the U.S. dollar, making Japanese exports more competitive, a development that directly benefited the Nikkei’s heavyweights, according to Reuters and the Economic Times.

Investor optimism has also been reinforced by expectations of sustained foreign buying in Japanese equities. The market continued to build momentum from last week amid a bullish outlook. Fast Retailing, the operator of Uniqlo, added further strength with a 1.2 % jump, making it another major contributor to Nikkei’s rise, reported Reuters.

Yet, the rally was not uniform across all sectors. Japan’s banking sub-index dropped 1.45 %, with Mitsubishi UFJ Financial down 1.96 % and Sumitomo Mitsui Financial falling 1.78 %, as highlighted by Reuters. Chip-related shares also lagged, with Tokyo Electron sliding 1.3 % and Advantest down 0.09 %, according to the Economic Times.

The performance of Japanese markets also mirrors broader global trends. The Dow Jones Industrial Average has been climbing toward record highs, with a notable boost from UnitedHealth shares after Berkshire Hathaway raised its stake, as reported by Reuters. That momentum spread across Asian equities, lifting investor confidence in Tokyo.

The latest rally builds on earlier milestones. On August 12, 2025, the Nikkei had already closed at 42,849.67, a 2.46 % gain, driven by surges in SoftBank Group—up 6.9 % amid speculation it could list its payments arm PayPay in the U.S.—and by strong semiconductor stocks such as Advantest and Lasertec. That session also saw a broader lift across Asia following a 90-day extension of the U.S.–China trade truce, which fueled optimism region-wide, according to Reuters and the Times of India.

Still, analysts remain cautious. In their assessment of the August 12 rally, Reuters reported that while a weaker yen, easing trade tensions, and upbeat corporate earnings have underpinned Japanese equities, seasonal factors such as the Obon holiday lull and the absence of new catalysts could test the sustainability of the surge.

India’s merchandise trade deficit surged to $27.35 billion in July, sharply higher than the $18.78 billion recorded in June and exceeding the $23.5 billion gap from the same month last year, according to data released by the commerce ministry on Thursday (August 14).

Exports of goods in July stood at $37.24 billion, while imports reached $64.59 billion, reflecting a widening imbalance even as the government maintains that overall trade performance remains resilient compared to global trends.

“Despite an uncertain global policy environment, India’s services and merchandise exports in July and in FY26 so far have grown substantially, and much higher than global export growth,” Commerce Secretary Sunil Barthwal said.

Engineering goods, electronics, pharmaceuticals, organic and inorganic chemicals, as well as gems and jewellery, were among the key contributors to outbound shipments last month.

Barthwal emphasised that New Delhi is accelerating efforts to reduce its reliance on a handful of markets — particularly the United States, which has recently imposed steep tariffs on certain Indian goods.

To address this, the government is moving to fast-track free trade agreement negotiations and review existing pacts with partners including the EU, UK, EFTA, Oman, ASEAN, New Zealand, Peru, and Chile.

In addition to securing new trade arrangements, Barthwal said the government aims to strengthen export promotion schemes and diversify import sources to mitigate supply risks.

“Expanding focus to the top 50 importing nations via mobilisation of missions abroad for export promotion efforts,” he noted, signalling an expanded diplomatic-commercial outreach.

The widening deficit underscores the twin challenge India faces: sustaining export momentum while curbing dependency on limited trade partners, even as global demand patterns remain volatile.

In a landmark step to modernise market oversight while easing operational hurdles, the Securities and Exchange Board of India (SEBI) has released a 99-page consultation paper outlining 20 proposals aimed at the broking and algorithmic trading sectors. The reforms seek to balance business facilitation with robust investor protection, streamlining regulations while addressing evolving market practices.

Regulatory Overhaul and New Definitions

SEBI has proposed sweeping changes to stockbroker regulations, introducing fresh definitions and eliminating outdated provisions. For the first time, "Algorithmic Trading" has been formally defined as orders generated through automated execution logic, while "Execution Only Platform" (EOP) is now recognised as a category for digital platforms enabling mutual fund transactions. The definition of "Proprietary Trading" has also been clarified to distinguish between a broker’s personal trades and client trades.

These changes consolidate what were earlier broad guidelines into core stockbroker regulations, bringing more clarity and uniformity. Language has been simplified, ambiguities removed, and inconsistencies addressed, ensuring parity across sub-regulations and alignment with other capital market intermediary rules. Redundant terms such as “small investor” are being scrapped, while references are being updated to reflect current practices and the Companies Act, 2013.

Notable operational reforms include a requirement for at least one director to be based in India to boost investor trust, mandatory grievance redressal within 21 calendar days, and permission for brokers to carry out other SEBI-approved activities via Separate Business Units (SBUs). The proposals also promote digital record-keeping over physical formats, strengthening compliance efficiency.

Industry voices have welcomed the move. Punnet Tewani of Fox Trading Solutions highlighted the benefits for retail algo tool developers, saying reduced compliance burdens would foster a healthier ecosystem. Algo trader Santosh Pasi noted that the changes align the industry with modern technologies, simplify regulations, and promote investor confidence.

Strengthened Oversight and Compliance Measures

The proposals extend beyond definitional changes, addressing critical aspects of risk management and market integrity. Stockbrokers will be bound by explicit obligations, including safeguarding client funds and securities, implementing robust internal controls, and adhering to enhanced cybersecurity and cyber resilience standards.

In response to recent market controversies such as the Jane Street incident, SEBI has also sharpened its surveillance capabilities to detect and prevent fraudulent or manipulative trading behaviour. Particular focus is being given to unusual trading patterns, including the high concentration of trading in index options on expiry days—where 90% of volume occurs, with 30% of it taking place in the last hour.

For inspections, SEBI has proposed provisions allowing exchanges to conduct them independently or jointly with the regulator and depositories, reducing procedural bottlenecks. Compliance costs for brokers are expected to drop as operations become more streamlined, potentially improving profitability without compromising market safeguards.

By redefining market terms, removing outdated clauses, and enhancing both compliance and oversight, SEBI’s proposals aim to create a regulatory environment that is both business-friendly and investor-protective. The reforms—if implemented—could significantly reshape India’s capital market operations, setting higher benchmarks for transparency, security, and efficiency.

This unprecedented rise comes despite significant headwinds, including a $5 billion currency swap maturation and intensive RBI intervention after U.S. President Donald Trump imposed fresh tariffs on Indian goods over the country's Russian oil purchases.

India's foreign exchange reserves slightly increased during the week ending August 8, even as the Reserve Bank of India aggressively intervened to prevent the rupee from hitting its historic lows, according to economist calculations released ahead of Friday's official data.

Market Pressures Escalate Higher

The rupee faced severe pressure during the week, threatening to breach its all-time low of 87.95 against the dollar. Trump's tariff announcement specifically targeted India's continued energy trade with Russia, making currency traders confused and forcing the RBI sweep into action across multiple markets.

"The RBI intervened in both onshore spot and non-deliverable forward markets to defend the rupee," said banking sources familiar with the operations. The central bank's total dollar selling reached $5.6 billion for the week, including the $5 billion swap delivery.

Revaluation Rescue Brings Respite

Despite this substantial outflow, rising gold prices and a weakening dollar provided crucial support through revaluation gains. Gaura Sen Gupta, economist at IDFC First Bank, estimates these favorable market movements generated a $9.8 billion boost to reserve valuations.

"The rise in FX reserves was fueled by a revaluation boost of $9.8 billion, reflecting higher gold prices and a weaker dollar," Sen Gupta explained. Also her prompt calculations suggest reserves increased by over $4 billion during the week.

Tactical Intervention by RBI

The RBI's approach revealed careful strategic planning. Rather than relying heavily on spot market sales, which directly drain reserves, the central bank seems to have emphasized non-deliverable forward interventions to influence offshore sentiment without immediate reserve impact.

"This implied spot intervention in the week was less and that the RBI would have relied on NDF," Sen Gupta noted, highlighting the central bank's strategic preference for preserving its dollar ammunition while still defending the currency.

Broader Implications Anticipated

The episode highlights the balancing act the central bank faces as it manages currency stability amid rising geopolitical and market pressures. Official reserve data, due on Friday, will confirm whether whether the estimated gains actually materialized. The data will provide crucial insight into the RBI's intervention capacity as global uncertainties continue to pressure emerging market currencies.

For now, the preliminary calculations suggest India's financial managers successfully navigated a turbulent week, using favorable market conditions to offset the costs of currency defense operations.

India’s Ministry of Steel has granted exemptions to 202 Bureau of Indian Standards (BIS) licences on the Steel Import Monitoring System (SIMS) portal—temporarily waiving mandatory raw-material certification requirements for foreign steel suppliers. This move is aimed at streamlining imports and mitigating delays faced by domestic Integrated Steel Plants (ISPs).

The exemptions were issued under an official order dated August 8, following a July 11 directive by the ministry. This allows select foreign steel manufacturers to continue exporting raw inputs without undergoing certification under BIS norms.

The relief extends to around 72 integrated steel plants in 16 countries, including major exporters like Japan, South Korea, Germany, Italy, France, Russia, and the United States. Japan leads with over 80 exempt licences, followed by South Korea with more than 50.

The ministry states the initiative is intended to maintain the steady flow of high-quality steel to domestic ISPs by removing hold-ups tied to certification via SIMS.

However, policy watchers regard this as a temporary, stop-gap measure. Ajay Srivastava of the Global Trade Research Initiative (GTRI) argues that “raw material certification may be redundant when the final product’s BIS compliance already ensures quality,” and points out that such requirements particularly burden MSMEs and rolling mills that rely on small, flexible orders rather than direct sourcing from large integrated facilities.

To address ongoing concerns about SIMS, Quality Control Orders (QCOs), and No Objection Certificates (NOCs), the Ministry of Steel will host an Open House session on August 19, inviting industry stakeholders to discuss these issues directly with officials.

The exemptions arrive against the backdrop of a mandatory compliance regime enforced since June 2025 under the Steel Quality Control Order 2024, where both finished steel products and their input materials must meet BIS standards as monitored by the Central Board of Indirect Taxes and Customs (CBIC) via SIMS. This requirement, while ensuring quality, has also prompted supply-chain inefficiencies, particularly when domestic production can't keep up.

Aligned with India’s Make in India agenda and rapid infrastructure expansion, easing bottlenecks in steel imports is becoming increasingly crucial. While this exemption offers immediate relief, it also highlights the need for a nuanced regulatory framework that balances quality assurance with supply flexibility.

The Ministry has indicated that similar exemptions could be granted on a case-by-case basis as more requests arise, demonstrating a willingness to maintain a responsive and adaptable import regime.