Five years ago, when the Covid-19 pandemic locked everyone in their homes, entrepreneurs across the world smelled an opportunity to make money from people bored out of their minds because of the closure of multiplexes, entertainment centres and sports arenas. That opportunity was in online gaming. And Indian entrepreneurs caught on, too.
Gaming companies that had been operating even before the pandemic quickly spread their wings, launching new games and features to attract gamers. Dozens of new gaming apps also sprung up within months. From online rummy and online poker to fantasy sports and esports, gamers suddenly had multiple options to spend their time, and money.
People, especially youngsters, soon began creating fantasy cricket or soccer teams on apps such as Dream11, instead of going out in the park and actually hitting the ball. Top cricketers and other celebrities endorsed these apps.
As the number of gamers rose, so did the interest of private market investors such as venture capital firms. Millions of dollars flowed into such startups and apps, particularly in online games that users played with real money. Because that’s where the actual opportunity was for those entrepreneurs and their investors to make some real money.
Venture funding helped the companies to hire, advertise and expand. It also pushed their valuation higher—Dream11 was valued around $8 billion and Mobile Premier League around $2.5 billion—and made their founders wealthy.
Interestingly, these games proliferated despite the lack of a clear legal and tax framework. Or maybe they flourished precisely because of that reason. Many critics compared games played with real money to gambling. Some state governments sought to ban such games. Some cases reached high courts and even the Supreme Court.
But the gaming juggernaut rolled on. Until this week, when it all came to a crashing halt.
The Lok Sabha and Rajya Sabha this week passed the Promotion and Regulation of Online Gaming Bill 2025 that the government introduced, saying that these games were causing psychological and financial harm.
“Such games often use manipulative design features, addictive algorithms … while promoting compulsive behaviour leading to financial ruin,” the bill says. It adds that anyone who offers such games could face a jail term of up to three years and a fine.
The sudden ban has come as a shock to gaming companies, their investors and employees. The impact was immediately visible on Nazara Technologies, a Mumbai-listed gaming company, as its shares slumped 14% in two sessions. ICICI Securities says the ban would make real-money gaming “infeasible” in India.
So, what can these companies and their investors do now? The companies will have to look for other opportunities, in segments such as esports that haven’t been banned. The investors will either have to stay patient, help the founders navigate out of this crisis or write off the millions of dollars they have poured into these startups. Employees at these gaming companies get the short end of the stick. As for the gamers, well, they can surely play some other games!
GST Reforms
In 2017, India launched its most ambitious indirect tax reform by merging multiple central and state levies into the Goods and Services Tax. Eight years later, the government has put forward another round of reforms, this time focused on rate rationalisation and a simpler tax process.
The centrepiece is the proposal to streamline GST’s complex rate structure. At present, there are four major slabs: 5%, 12%, 18% and 28%. The government plans to remove the 12% and 28% slabs. Most goods and services taxed at 12% would shift to 5%, while items under the 28% bracket would move to 18%. A separate 40% rate is envisaged for “sin goods” such as tobacco and luxury items.
The logic is straightforward. By lowering prices in some categories, policymakers hope to boost consumption, with higher sales volumes offsetting potential revenue losses. There is also a geopolitical angle: stronger domestic demand could help cushion the blow from the 50% tariff the United States has recently imposed on Indian exports.
For now, however, these remain proposals. Implementing them will require significant political manoeuvring. Any major change in GST must be approved by a two-thirds majority in the GST Council. The Centre holds one-third of the vote, while the states collectively hold the rest. With states in control of the majority, their support is essential.
The challenge is that states stand to lose the most if tax revenues fall. The compensation cess, which ends in March 2026, was designed to protect states from revenue shortfalls during GST’s initial years. Without it, their fiscal space is shrinking, and they may demand more safeguards before backing reforms.
The question now is whether states will support the Centre’s plan or insist on a larger share of the bargain before giving approval. The fate of GST reforms will depend on how that negotiation unfolds.
A Step Upward
The GST reform isn’t the only piece of good news that will boost the Indian economy. In another positive development, S&P Global Ratings has upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’. The upgrade comes after S&P revised India’s rating outlook to positive from stable in May 2024.
S&P cited India’s strong economic growth, fiscal consolidation, and monetary policy actions that have managed to keep inflation under control as reasons for lifting the rating. It also said that it expects the impact of US tariffs on the Indian economy to be “manageable” since the economy was driven mainly by domestic demand.
But why is this important? Well, this is the first upgrade in India’s credit ratings in 18 years—since 2007, to be precise. Also, ‘BBB-’ is the lowest investment-grade rating. This means that the upgrade will boost debt inflows by foreign investors into India and help Indian companies to raise overseas debt at lower interest costs.
The timing of the upgrade is important, too, as it comes when local companies are bracing for the impact of Donald Trump’s tariffs on Indian goods.
To be sure, S&P’s global peers such as Fitch and Moody’s haven’t yet changed their India ratings. Fitch has kept its India rating unchanged at ‘BBB-’ since 2006 while Moody’s has retained a ‘Baa3’ rating since June 2020. But Economic Affairs Secretary Anuradha Thakur said she expects other rating agencies to also upgrade.
Moreover, S&P itself has issued a note of caution. It said that any weakening in fiscal consolidation or a structural slowdown in economic growth could pose risks to the ratings. On the plus side, another upgrade is also possible if India manages to narrow its fiscal deficit significantly, S&P said.
Change in the Air
Moving on to capital market-related news, the Securities and Exchange Board of India this week made several proposals that—if implemented—could bring substantial changes to initial public offerings and futures and options trading.
The regulator proposed to allow large companies greater leeway not only at the time of IPOs but also after listing on stock exchanges. It said large companies could sell a minimum of 2.5% of their paid-up share capital in an IPO—down from 5% currently—if their market capitalisation is more than Rs 500,000 crore after the listing.
In another significant proposal, SEBI said that companies with post-listing market cap of Rs 50,000 crore to Rs 100,000 crore may be allowed to meet the required 25% public float in five years instead of three years currently. Companies with a post-listing valuation of above Rs 100,000 crore will get 10 years to meet the norms. In addition, SEBI withdrew its earlier plan to cap retail investors’ quota in IPOs exceeding Rs 5,000 crore to 25% from 35%.
SEBI said that large companies often face difficulties in diluting their equity through IPOs because of their large offerings. This, it said, can discourage companies from listing in India. The proposals come at a time when markets are anticipating large IPOs from the likes of Reliance Jio, Tata Capital, and the National Stock Exchange.
In another set of proposals, SEBI proposed to restructure the Bank Nifty, the BSE Bankex and the Nifty Financial Services index, which are linked to F&O contracts, in a phased manner over a few months.
SEBI had previously suggested that these indexes should have at least 14 stocks, that the top constituents’ weightage shouldn’t exceed 20% and that the total weightage of top three stocks shouldn’t be more than 45%.
Currently, Bank Nifty has 12 stocks while the BSE Bankex has only 10. HDFC Bank and ICICI Bank are the top stocks in these indices with a weightage of 29.09% and 26.47%, respectively, in Bank Nifty and 23.36% each in BSE Bankex. In the Nifty Financial Services index, there are 20 stocks but HDFC Bank’s weightage is 33.45% and ICICI’s is 22.96%.
This high weightage, SEBI fears, makes it easier for large traders to manipulate the entire index by just trading in the stocks of two companies. And this is exactly what US trader Jane Street is alleged to have done. So, if SEBI does implement its proposals, the NSE and BSE would have to restructure these indexes over the next few months.
Market Wrap
Indian stock markets rose for a second week in a row, buoyed by the government’s plans to revise the goods and services tax and S&P’s upgrade of India’s credit rating.
The Sensex edged up 0.9% while the Nifty climbed 1% this week, despite a sharp fall on Friday. Small-caps and mid-caps rose almost 2% each.
Twelve of the 16 major sectoral indexes ended in the green, led by autos and consumer durables on hopes that lower GST will drive consumption. The auto index jumped 5% while consumer durables gained 4%.
Maruti Suzuki was the top gainer with its stock revving up 11%. Hero MotoCorp, Bajaj Auto and Mahindra & Mahindra also jumped. FMCG giants Nestle India and Hindustan Unilever surged more than 6% each.
Other companies that gained on hopes they will benefit from a GST cut included Titan, Tata Consumer, Royal Enfield bike maker Eicher Motors and Tata Motors. Index heavyweight Reliance Industries and most IT stocks, including Infosys, Tech Mahindra, TCS and Wipro also ended in the green.
Banking and financial stocks were mixed. ICICI Bank, Kotak Mahindra Bank, Axis Bank rose this week but SBI and HDFC Bank fell. Similarly, Bajaj Finance and Bajaj Finserv closed higher but Shriram Finance and Jio Financial ended lower.
PSU stocks were mostly lower with ONGC, NTPC, Power Grid, Coal India and Bharat Electronics falling. The bigger Nifty loser, however, was ITC as it fell more than 3% on worries that the government would increase the GST on cigarettes.
Other Headlines
- India, China agree to resume direct flights, boost business links.
- US-India trade talks scheduled for August 25-29 called off.
- Wipro to buy Harman Connected Services for $375 million.
- Tata Motors launches four cars as it returns to South African market after six years.
- India’s infrastructure output grows 2% year-on-year in July versus 2.2% in June.
- India’s unemployment rate falls to 5.2% in July from 5.6% in June, govt data shows.
- UltraTech Cement to sell up to 6.5% stake in India Cements to meet SEBI norms.
- Govt tables bill in parliament to ban online games played with money, citing addiction risks.
- OpenAI rolls out cheapest ChatGPT plan at ₹399 per month in India to chase growth.
- Hindustan Zinc to invest ₹3,823 crore to build metals reprocessing plant.
- State-run MTNL defaults on loan repayments worth ₹8,700 crore.
- JSW Steel, South Korea’s POSCO to explore setting up 6-million-tonne steel plant.
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Investing in International Markets
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today. #MutualFundSahiHai #KuveraSabseSahiHai
