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On August 18, 1950, exactly three years and three days after India gained freedom from British rule, the fledgling nation took another step in its quest to achieve energy independence.
That day, the government incorporated a company that was tasked to mine and process the monazite sand found on the beaches of Kerala. The aim was to extract thorium, a radioactive mineral that can be used to run nuclear power plants.
Seventy-five years later, that state-owned company may well help India meet another critical quest – the supply of rare earth minerals. That company is IREL (India) Ltd, or Indian Rare Earths Ltd as it was originally known.
Why are we talking about a company most people wouldn’t even know exists? Well, because of the growing importance of rare earth elements, especially rare earth magnets, in the world economy across several new-age sectors.
Over the past few weeks, several Indian and global companies operating in industries such as automotive and renewable energy have been in a tizzy after China curbed the exports of rare earth magnets in response to the trade war ignited by US President Donald Trump. China controls as much as 90% of the global supply of these elements and magnets.
But why are these neodymium and samarium-cobalt magnets important? It’s because these magnets are used in everything from electric vehicles and high-speed trains to wind turbines and MRI machines.
China’s curbs rattled the auto industry in India and abroad, forcing companies to warn of supply chain disruptions. In India, Maruti Suzuki cut its near-term production targets for its maiden electric vehicle—the eVitara—because of these shortages. Nudged by the industry, the government got in touch with Beijing in an attempt to resolve the matter.
While there is no update yet on India-China discussions, Trump this week announced a tentative trade deal under which Beijing assured Washington of supplying rare earth minerals and they agreed to cut tariffs on each other’s goods.
But the deal still doesn’t solve a massive problem—China’s near-total dominance over rare earth elements.
This is where the IREL, which operates under the Department of Atomic Energy, can pitch in. Over the past seven decades the company has gradually expanded its capabilities. Today, it processes several critical minerals including titanium ores, zircon and garnet across its facilities in Kerala, Odisha, and Madhya Pradesh.
In May 2023, it began production of samarium-cobalt permanent magnets at its Vizag plant. It has set up a rare earth and titanium theme park in Bhopal where it is working on commissioning of a neodymium metal plant and plants for LED phosphor. It has also started production of some other rare earth elements such as cerium and lanthanum metals.
IREL’s growth reflects in its financial performance. Its revenue was Rs 1,462.50 crore in 2021-22, with nearly half coming from exports. By 2023-24, revenue had risen to Rs 2,104 crore, according to its annual report. Net profit jumped to Rs 1,012.22 crore in 2023-24 from Rs 555 crore in 2021-22 and just Rs 50.75 crore in 2016-17.
To be sure, the company is far smaller than the Chinese giants which dominate the global rare earth metals market that consulting firm Future Market Insights projects will grow from $6.2 billion in 2024 to $16.1 billion by 2034.
Still, for India to secure its future, it is imperative to tap into its rare earth reserves of 6.9 million metric tons, the world’s fifth-largest, and build processing capacity. IREL, other local companies and the government must begin to solve this problem.
Poor Prospects
The battle over rare earth elements is just one aspect of the ongoing disruption in international trade. The broader picture is how this disruption is hurting the global economy. Another indication of that came this week when the World Bank trimmed its global growth forecast for 2025 to 2.3% from 2.7% previously, citing a “significant headwind” for nearly all countries due to the tariff war unleashed by US President Donald Trump and increased uncertainty.
The multilateral lender, however, didn’t tinker with its estimate for India in its latest Global Economic Prospects report. The Indian economy would grow at 6.3% in the current financial year 2025-26, the bank estimates. This is the same pace of growth it projected in April but down from 6.7% it estimated in January. This is also lower than the 6.5% rate at which India’s gross domestic product is estimated to have grown in 2024-25.
Essentially, the World Bank expects the Indian economy to grow at a slower pace in the current financial year than in the last year. These projections are a tad more pessimistic than the Reserve Bank of India’s expectation of a 6.5% growth.
In fact, the World Bank cut its forecasts for almost 70% countries, including the US and Europe, from the levels it projected before Trump took office and redrew the global trade map. But it kept its forecast for China steady at 4.5%.
The bank also forecast that global trade would expand by only 1.8% in 2025, down from 3.4% in 2024. The escalation in trade barriers, it said, would result “in global trade seizing up in the second half of this year … accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets.”
In this gloomy outlook, the only comfort perhaps was that the bank didn’t forecast a recession. But we need to wait before we take a sigh of relief. For, on Friday, Israel attacked Iran’s military and nuclear installations, flaring up tensions across the Middle East. This pushed crude oil prices more than 10% higher, boosted gold and dragged the rupee down.
Just Cool It
Switching back to India, government data this week showed retail inflation slowed to 2.82% in May due to easing food prices from 3.16% in April. This is the lowest level in more than six years. Equally significant is that inflation has now remained below the Reserve Bank of India’s 4% target for four months in a row—that’s the longest stretch in six years.
The latest data confirms what the RBI said last week about the moderating inflationary trend when it slashed interest rates by an unexpected 50 basis points to boost GDP growth amid rising global uncertainties.
The RBI had also cut its inflation forecast for 2025-26 to 3.7% from 4% previously as it expected farm output to remain strong. And the latest data indicates as much.
Inflation in food items cooled to 0.99% in May from April’s 1.78%. Vegetable prices actually fell 13.7% after an 11% drop in April. Prices of pulses declined 8.22% following a 5.23% drop in April. In fact, food inflation in May was the lowest since October 2021.
Will the cooldown in inflation give the RBI more headroom to cut rates? Probably not. Remember, the RBI last week said that it had limited scope for additional rate cuts and changed its policy stance from “accommodative” to “neutral”.
So, for now, the focus will shift from inflation to economic growth as the trade wars pan out.
Drop by Drop
Inflation wasn’t the only datapoint that showed a decline in May. The month also recorded a drop in equity mutual fund inflows. Net inflows slumped 22% month-on-month to Rs 19,013 crore, according to the Association of Mutual Funds in India (AMFI). This is the lowest level since April 2024 and marks the fifth straight month of decline.
Inflows into large-cap funds fell by more than half to Rs 1,250 crore while mid- and small-cap funds recorded a drop of 15% and 20% to Rs 2,809 crore and Rs 3,214 crore, respectively.
On the plus side, money flowing through systematic investment plans (SIPs) rose slightly to a record high of Rs 26,688 crore and the number of SIP accounts increased to 8.56 crore from 8.38 crore in April.
The reasons for the fall in overall inflows aren’t hard to fathom—rising valuations after the markets bounced back in April, the India-Pakistan conflict that saw both countries launch aerial attacks, and global trade concerns.
The benchmark Sensex and Nifty 50 had fallen about 17% from their record highs in September until April 7, but then rallied 12% by the end of April. The two benchmarks rose another 1.7% in May. Meanwhile, the small-cap index jumped 8.7% in May and the mid-caps climbed 6.1%.
The sharp rally was supported by a return of foreign portfolio investors and an improvement in quarterly earnings. But the rally also means that mutual funds are now sitting on a massive cash pile of nearly Rs 2.17 trillion, or almost $25 billion, as they wait for more favourable valuations to deploy this money.
Market Wrap
India’s stock markets ended lower this week, as losses in the latter half erased initial gains on concerns of rising geopolitical tensions.
The NSE Nifty fell 1.1% while the BSE Sensex dropped 1.3% for the week.
Investor sentiment soured especially after Israel on Friday launched military strikes on Iran. The attacks, along with continued uncertainty over international trade, offset the positive trends of a drop in inflation and the Reserve Bank of India’s jumbo rate cut last week.
Market breadth was negative with nearly two-thirds of the 50 Nifty stocks and the 30 Sensex companies ending in the red.
Adani Ports, which operates a port in Israel, was among the top losers. Zomato parent Eternal, Titan, Tata Steel, Power Grid Corp, Mahindra & Mahindra, Tata Consumer, and HDFC Bank were among the other major stocks that fell this week.
IT stocks were the biggest gainers after their underperformance in recent weeks. Tech Mahindra was the biggest winner among the Nifty stocks, followed by Wipro. HCL Tech, Infosys and TCS also ended in the green. ONGC, Grasim, and Dr Reddy’s Labs were among the other gainers.
Other Headlines
- Air India flight from Ahmedabad to London crashes in India’s worst air disaster.
- Israel’s attack on Iranian military, nuclear installations pushes oil, gold prices higher; stocks slip.
- Gold futures top Rs 1 lakh per 10 grams to hit record high.
- India, China agree to expedite resumption of direct air services.
- Tata Motors to invest up to Rs 35,000 crore over five years for EVs, new cars.
- Reliance Industries sells shares worth Rs 7,704 crore in Asian Paints.
- Finance ministry denies reports of introducing fees on UPI transactions.
- Adani eyes IPO of airport unit by 2027, plans $100 billion across the group, reports Bloomberg.
- SEBI allows NSE, MCX to launch electricity futures contracts.
- SEBI permits Jio BlackRock to operate as investment adviser.
- SEBI probes quant trading firm Jane Street’s derivative trades over three years.
- BigBasket to start 10-minute food delivery across India by March 2026.
- Ride-hailing startup Rapido to venture into food delivery.
That’s all for this week. Until next week, happy investing.
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