Most major crises rarely arrive all at once. They tend to build quietly, almost invisibly at first. The early signs often look small and easy to dismiss while larger systems continue to function normally.
The global financial crisis of 2008 began that way. Long before markets collapsed, there were scattered warnings in the US housing market: rising mortgage defaults, a few lenders failing, early tremors in complex financial products few outside the industry paid attention to. Something similar happened in early 2020. Before the world understood the scale of Covid-19, the first signals were localised – a few pneumonia cases in China, followed by travel advisories and small disruptions that initially appeared manageable. Those early moments marked the beginning of global chaos.
Something quieter may now be unfolding in India’s energy system.
Over the past week, the escalation of military tensions in the Middle East has begun to disrupt shipping flows around the Strait of Hormuz – the narrow corridor through which a large share of the world’s oil and gas shipments pass. Global markets have responded primarily through oil prices. Inside India, however, the first visible signs have appeared in a different fuel altogether: liquefied petroleum gas.
India imports roughly 60% of the LPG it consumes, and 90% of that must pass through Hormuz. Any slowdown in tanker traffic, therefore, carries immediate implications for domestic supply chains.
The earliest signals have begun appearing in distribution networks. Some restaurants in major cities have shortened operating hours or removed dishes from menus after running low on cooking gas. Some have closed temporarily. Consumers in several areas have reported difficulty booking LPG cylinders, while queues at distribution centres have lengthened as households and small businesses attempt to secure supplies earlier than usual.
The government has urged consumers not to panic. It says India holds sufficient LPG stocks and that supply systems remain stable. Yet the episode highlights how central LPG has quietly become to India’s everyday economy.
Over the past decade, government programmes have accelerated the shift from traditional cooking fuels such as firewood and agricultural residue toward LPG. Millions of households now depend on LPG cylinders for daily cooking, while restaurants and small food businesses rely on it because it is efficient, portable and relatively affordable. That transition has created a supply chain that depends on regular imports.
While India maintains emergency storage designed to cushion disruptions in crude supply, LPG storage capacity across refiners and distributors is far smaller. Industry estimates suggest inventories could cover roughly two to three weeks of demand if shipments were significantly delayed.
This difference changes how disruptions appear in the economy. Crude oil shocks typically surface first through prices as markets gradually adjust to tighter supply. LPG disruptions, by contrast, tend to appear more quickly through availability.
Markets are still trying to assess whether the current disruptions represent a temporary delay or the beginning of a more sustained constraint on Gulf energy flows. If tanker traffic through Hormuz resumes normal passage in the coming days, the system may absorb the shock through inventory adjustments and rescheduled deliveries. But if shipping remains constrained for longer, the pressure could gradually move from distribution networks into broader supply shortages.
Energy systems often depend as much on expectations as on physical supply. When households and businesses begin booking cylinders earlier than usual, demand can spike suddenly even if inventories remain largely intact. In that sense, shortages can sometimes be accelerated by behaviour as much as by scarcity.
For now, the signals remain small. But energy disruptions rarely announce themselves loudly at the beginning. They tend to surface first at the edges of the system, before markets fully register their significance.
Refining the Narrative
For several months last year and until the US and India agreed on a trade deal last month, Donald Trump and his administration officials had been targeting India over the purchase of crude oil from Russia. At the centre of that campaign was one company—Mukesh Ambani’s Reliance Industries.
This week, the script flipped when Trump announced plans for a new oil refinery in Texas and publicly thanked Reliance for what he described as a “tremendous investment” backing the project.
What exactly that means remains unclear. Neither Reliance nor the project developer, America First Refining, has explained whether the Indian company would participate as an equity investor, a technology partner, a crude supplier or in some other capacity.
While the developer it did say that it “received a 9-figure investment from a global supermajor”, implying a commitment of above $100 million but less than $1 billion, its disclosure focuses instead on the scale of the proposed commercial relationship. It describes a long-term arrangement covering the processing of 1.2 billion barrels of US light shale oil and the production of 50 billion gallons of refined fuels – flows the company estimates could total roughly $300 billion over time.
Markets are still trying to determine how much of that figure represents firm investment and how much reflects projected trade flows stretching over decades.
Behind the project sits a structural question. The US has become the world’s largest producer of light shale oil, yet much of its refining system was built decades ago to process heavier crude. Building capacity designed specifically for shale could help close that mismatch.
For Reliance, the significance may be more strategic than financial – at least for now. The company operates one of the world’s largest refining complexes in Jamnagar and has long positioned itself as a global refining and energy trading player rather than only a domestic one. What remains uncertain is whether the announcement reflects a concrete partnership or simply the early framing of a project still seeking investors.
For markets, that distinction matters because energy projects often begin as political signals long before they become financial realities. Investors will be closely watching whether this refinery progresses from announcement to capital allocation – and what role Reliance ultimately chooses to play in that process.
A Little Opening
Investor mood around India’s manufacturing story has carried a quiet tension for some time. The assumption embedded in policy since 2020 was straightforward: capital from countries sharing a land border with India – most notably China – would remain tightly screened after the border clash that year. Security concerns came first. Investment approvals slowed. Some joint ventures stalled. This week’s cabinet decision suggests a modest recalibration of that posture.
The government has amended the foreign direct investment policy governing investments from land-bordering countries. The change allows investors from these jurisdictions to take non-controlling stakes of up to 10% under the automatic route, subject to existing sectoral caps. It also introduces a 60-day processing timeline for proposals in selected manufacturing sectors such as electronic components, capital goods, polysilicon, and wafer production.
The intention is to reduce uncertainty around approvals and revive investment flows that had slowed under the blanket scrutiny introduced in 2020.
That earlier framework, the government had then said, was designed to prevent opportunistic takeovers of Indian companies during the pandemic. Over time, however, it also created friction for global funds and joint ventures where Chinese investors held relatively small stakes but still triggered government review.
The revised framework attempts to separate those cases. Minority investments below the threshold can proceed automatically. Larger proposals – particularly those involving manufacturing collaborations – will continue to undergo scrutiny within a defined approval window. Majority ownership must remain with Indian residents.
The adjustment indicates the government is trying to accelerate domestic capacity in areas such as electronics supply chains and solar components. Many of these sectors still rely on capital, technology or inputs linked to Chinese firms.
Whether the change meaningfully revives cross-border investment remains uncertain. Security screening remains in place, and the list of sectors eligible for faster approvals could still evolve.
But the direction is visible. India is not abandoning caution. It is attempting something more calibrated – reopening selective channels for capital and technology while keeping control anchored at home. Markets often move in such incremental steps long before narratives fully catch up.
Gold Losing Sheen; Mid, Small-caps Shine
Talking about investments, mutual fund investors continued to deploy capital during February despite rising stock market volatility.
Equity mutual fund inflows in February rose 8.1% to Rs 25,977 crore from Rs 24,028 crore in January, data from the Association of Mutual Funds in India showed. However, inflows declined 11% from Rs 29,303 crore in February last year.
AMFI data showed also that inflows through systematic investment plans dropped from Rs 31,002 crore in January to Rs 29,845 crore in February, partly due to fewer trading sessions during the month.
Flexicap funds recorded a 10% decline in monthly inflows while large-cap funds recorded a 5% rise. In contrast, mid- and small-cap funds saw monthly inflows surge 26% and 32%, respectively, indicating the investors are looking to take advantage of a drop in valuations in these stocks over the past few months.
Another notable trend in February was the sharp drop in investments in gold exchange-traded funds to Rs 5,255 crore from more than Rs 24,000 crore in January, when they topped equity MF inflows for the first time.
Meanwhile, inflows into sectoral and thematic funds jumped 187% on a month-on-month basis to Rs 2,987 crore in February. Some hybrid fund categories also received heavy inflows. Multi-asset allocation funds got the highest inflow of Rs 8,476 crore, followed by balanced advantage and dynamic asset allocation funds at Rs 1,521 crore.
Market wrap
India’s stock markets slumped this week as the escalating war in the Middle East pushed crude oil prices higher, raising inflation and growth worries as well as concerns about a hit to corporate earnings. Foreign fund outflows made the matter worse, with overseas investors selling stocks worth $5.7 billion so far in March.
The Nifty 50 lost 5.3% this week while the BSE Sensex slumped 5.5%. This is the worst week for the Nifty since June 2022 and for the Sensex since May 2020.
The mid-cap index fell 4.6% while the small-cap index dropped 3.7%. All the 16 major sectoral indices logged losses this week, led by auto stocks and financials.
The Nifty Auto plunged 10.6% on fears the Middle East war could hit output and exports. Mahindra & Mahindra, Eicher, Maruti Suzuki, Tata Motors Passenger Vehicles and Bajaj Auto sank between 12% and 9.5%.
Larsen & Toubro was the bigger Nifty loser, falling nearly 13% on worries about its Middle East exposure.
Among financials, Bajaj Finance lost 10% while Axis Bank, SBI and Kotak Mahindra Bank fell 8-9% each and Bajaj Finserv ended 7% down. Ultratech, JSW Steel, Tata Steel, Adani Ports, Eternal were among the other top losers.
Only a handful of stocks bucked the trend, with Coal India jumping 6% on prospects of higher demand due to worries about a shortage of LPG and natural gas. Power producer NTPC and Power Grid Corp also ended higher.
Other Headlines
- US starts probe into unfair trade practices of India, China, 58 other countries over forced labor
- NSE selects 20 merchant bankers, eight law firms for proposed IPO
- Walmart-owned Flipkart shifts base to India from Singapore as it prepares for IPO
- Enforcement Directorate freezes Rs 582 crore worth of properties linked to Anil Ambani firms
- India’s retail inflation rises to 3.21% year-over-year in February from 2.74% in January
- Govt plans new incentives for phone production in boost for Apple, Samsung
- Japan’s MUFG, State Bank of India tie up to finance projects, M&As
- RBI examining complaint against Standard Chartered Bank’s asset sales
- RBI grants payment aggregator licence to fintech firm Cred
- IndiGo CEO Pieter Elbers resigns, founder Rahul Bhatia takes over as interim chief
- Renault to launch four new models in India by 2030
That’s all for this week. Until next week, happy investing!
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