When Urjit Patel took charge as RBI Governor in September 2016, the repo rate—the key policy rate at which the central bank lends to other banks, and which mainly decides what interest rates we get on deposit and what we pay on loans—stood at 6.5%. By the time he exited abruptly in December 2018, the rate, despite several ups and downs in between, had circled right back to 6.5%.
Then came Shaktikanta Das. He entered office with the repo rate still at 6.5% and navigated one of the most turbulent monetary policy phases in recent history. COVID-19 struck. Later, inflation surged. The rate went on a rollercoaster—slashed to revive demand, hiked again to tame inflation. Das also ended his tenure with the repo rate exactly where he found it: 6.5%.
Sanjay Malhotra stepped in next. The baton passed, the rate unchanged. And then—he cut the rates in his first policy. And cut again in next and the next. But in his fourth policy on Wednesday, Governor Malhotra hit the pause button.
Why the pause? For one, the RBI wants to allow the 100-basis-point easing since February to fully work its way through the system. Transmission takes time. Second, external headwinds have picked up. Donald Trump is rattling sabres again—painting India’s WTO-compliant tariffs as unfair, complicating trade diplomacy by linking tariffs to India’s purchase of oil from Russia. And third, global trade winds aren’t exactly blowing favourably.
But Malhotra has one clear tailwind: inflation.
Consumer inflation in India hit a six-year low of 2.1% in June. And preliminary data for July looks encouraging too, or at least that is what Governor Malhotra hinted.
Growth, however, is another story. Industrial output has been dragging. As noted in the previous newsletter, IIP numbers have barely moved over the past few months.
So, are we in for another rate cut soon? Possibly. Transmission is expected to be largely complete by the next policy, and with inflation soft and growth sluggish, it seems like the stars might align.
But hold that thought.
Every monetary policy meeting brings updated projections—not just for the current year, but for the next four quarters. And here’s the twist: the latest projections still support the case for easing. GDP growth for FY26 is forecast at 6.5%, down from 7.4% in the last quarter of FY25. Inflation in FY25 is pegged at a benign 3.1%, down from 3.7% projected initially.
Yet, it’s the new fifth-quarter projection—the April-June 2026 estimate—that casts a shadow. The RBI sees inflation climbing to 4.9% that quarter. Still within the comfort zone, yes, but the direction matters. A rising inflation trajectory could restrain the central bank’s hand.
The reasons? A fading base effect and a possibility of stronger demand from earlier rate cuts. And these aren’t one-off drivers—they could carry through into projections for July-September 2026 as well.
Still, don’t rule out one more cut just yet. If Trump’s tariffs derail India’s export momentum and dampen growth, the RBI might be forced to respond. Even inflation around 5% may not be a deal-breaker if growth needs a shot in the arm.
Upping the Ante
When it comes to economic uncertainties, the strongest headwinds facing India right now are blowing in from the United States.
President Donald Trump, having already slapped a 25% tariff on Indian goods earlier this year, has now announced an additional 25% penalty tariff—this time citing New Delhi’s ties with Russia.
New Delhi’s claim: Yes, India has traded with Russia. Openly. Transparently. And most importantly, without breaking any rules. What India did was commerce—pure and simple.
When the West decided to boycott Russian oil after the Ukraine conflict, energy prices went into a tailspin. India, a major energy importer, acted in its national interest. It purchased discounted Russian crude—oil that helped ease the global supply crunch and kept prices stable, particularly in Gulf markets. This was even passively encouraged by those opposing Russia. Even with Russia cut off from the SWIFT payment system, New Delhi and Moscow found workarounds to settle trade. It wasn’t defiance. It was pragmatism. And for nearly two years, it worked.
But now, Trump’s administration seems to be taking a different view. The president, increasingly at odds with Vladimir Putin, has turned his gaze toward India—and not kindly. A relationship that developed out of necessity is being penalised as if it were a betrayal. The trouble is, such dependencies built over years can’t be undone overnight. Yet, Washington decided to act.
Many analysts believe this penalty has less to do with geopolitics and more to do with trade bargaining. India has been reluctant to open up its agricultural and dairy sectors—something the US has long pushed for. This latest move, some argue, is more about extracting concessions than punishing a geopolitical stance. After all, other countries are still trading with Russia and haven’t faced similar penalties.
When asked about US imports from Russia, Trump simply said he’d “look into it.” There’s been no answer since.
Whether this pressure campaign will isolate India or simply escalate trade tensions further remains to be seen. For now, Trump says talks are not happening, but reports suggest a US trade delegation is expected to visit India soon.
Until then, New Delhi is holding its ground, and holding its breath.
Oil’s not Well
India maybe standing its ground for now, some adverse impact is already becoming visible. Billionaire Mukesh Ambani-led Reliance Industries, India’s biggest company by market cap, said in its annual report released this week that geopolitical and tariff-related uncertainties could hurt trade flows and the demand-supply balance.
RIL, which operates the world’s largest refining complex in Jamnagar and is the biggest Indian buyer of Russian oil, said crude prices were volatile amid the threat of sanctions, US tariff policies, and output decisions by oil producers. Reliance had last year signed a deal late last year with Russian state-owned oil company Rosneft to buy almost 500,000 barrels a day of crude oil. Rosneft also owns a direct stake in Nayara Energy, which operates a refinery at Vadinar in Gujarat.
Both Reliance and Nayara are under pressure to reduce oil imports from Russia. In fact, some media reports say that state-owned Indian oil companies have already reduced or halted imports from Russia. This, in turn, may not only weigh on their own financial situation but may also lead to a higher import bill for India and jack up inflationary pressures in the broader economy.
Apart from oil, other sectors that will be hit hard by US tariffs include garments, auto components, and gems and jewellery. Media reports said that US companies have already started asking their Indian garment suppliers to halt orders or shift production to other countries.
With 50% tariffs, India is now at a big disadvantage versus other textile exporters such as Bangladesh, Vietnam, and even China, where tariffs range from 20% to 30%.
Meanwhile, Moody’s Ratings said Trump’s tariffs will severely hurt India’s attempt to develop its manufacturing sector and may reverse some gains India made in attracting foreign investments.
IPO rush continues
While Trump’s tariff tantrums have pulled the Indian stock markets down, the primary market remains as robust as ever with many companies launching initial public offerings or filing draft documents to do so. This week was no exception.
JSW Cement, a unit of billionaire Sajjan Jindal-led JSW Group, floated its IPO on Thursday aiming to raise Rs 1,600 crore by issuing new shares to fund a factory in Rajasthan. It has priced its IPO in a range of Rs 139-147. The IPO also includes an offer for sale of Rs 2,000 crore by the cement maker’s two investors—American buyout firm Apollo Global and the Dubai-based Synergy Capital, an investment firm started by former ArcelorMittal executive Sudhir Maheshwari.
Knowledge Realty Trust, a real estate investment trust set up by Bengaluru-based developer Sattva Group and American private equity firm Blackstone, raised Rs 4,800 crore through an IPO. The REIT fixed its price band at Rs 95-100 per unit and was subscribed nearly 12.5 times at the end of bidding.
Another company that will launch its IPO next week is Bluestone Jewellery and Lifestyle. The jewellery retailer will issue fresh shares to raise Rs 820 crore while its existing shareholders, including venture capital firms Accel and Kalaari Capital, will offload 13.9 million shares. The IPO opens on August 11 and closes on August 13.
Tata Capital, the financial services arm of the Tata Group, filed draft documents for an IPO which includes an issue of up to 210 million new shares while existing shareholders will sell up to 265.8 million shares.
Tata Sons, the group’s holding company, plans to sell up to 230 million shares and International Finance Corporation, an arm of the World Bank, intends to sell up to 35.8 million shares.
The IPO is in line with the RBI’s norms for large non-bank lenders to list on stock exchanges. While Tata Capital hasn’t yet decided on a price band, media reports say the IPO size could be as large as Rs 17,000 crore, or around $2 billion.
Another financial services company that filed its draft red herring prospectus for the IPO is Asset Reconstruction Company (India) Ltd, or ARCIL. This would be a rather unique IPO given that ARCIL is the first asset reconstruction company in India seeking to go public.
While companies such as Tata Capital and JSW Cement shouldn’t have any difficulty attracting investors, it might be a little tougher for ARCIL given that most people wouldn’t have heard of the company or even understand what it does—essentially, it buys bad loans from banks and NBFCs at a discount, then recovers and turns around those non-performing assets to make money.
Tata Capital and ARCIL join more than six dozen companies whose IPO applications are pending with SEBI. In addition, many others have already received SEBI approval. This week, for instance, SEBI approved IPO proposals of five companies including Prestige Hospitality and brokerage firm Anand Rathi. All in all, this indicates that the IPO pipeline has so far remained strong despite external shocks.
Market Wrap
Indian stock markets slumped for the sixth week in a row as additional tariffs imposed by US president Donald Trump and tepid corporate earnings soured sentiment. Continued outflows by foreign investors—they have sold $4 billion of Indian equities in July and August so far—further put pressure.
The Sensex lost 0.9% while the Nifty slipped about 0.8% this week. The small-cap index lost 1.4% while the mid-caps slipped 1.1%. The six-week decline is the longest period of losses since the pandemic month of April 2020. As many as 13 of the 16 major sectors fell this week, led by a 2.8% drop in the pharma index while the energy index slipped 1.4%.
Adani Enterprises plunged 7.4% to become the top loser for the second week after quarterly profit nearly halved. FMCG companies Nestle, Hindustan Unilever, Tata Consumer and ITC slipped on margin pressures in their quarterly earnings reports. Drugmakers Sun Pharma, Dr Reddy’s Labs and Cipla ended lower on export-related worries.
IT stocks were mixed—Infosys and Wipro fell but TCS, HCL Tech and Tech Mahindra ended higher.
Hero MotoCorp was the top performer this week, surging 6.7% after beating earnings forecasts. Its peers Bajaj Auto and Eicher, the maker of Royal Enfield bikes, also gained as did carmaker Maruti Suzuki. Three Tata Group companies—Titan, Trent and Tata Steel—were also among the biggest winners this week.
Earnings Snapshot
- Bharti Airtel Q1 consolidated net profit soars 43% to Rs 5,948 crore on price hikes
- DLF consolidated net profit increases 18% to Rs 763 crore
- Tanishq chain operator Titan Q1 profit jumps 52.5% to Rs 1,091 crore from Rs 715 crore a year earlier
- Zudio store operator Trent’s profit rises 9.5% to Rs 430 crore, revenue grows 19%
- Life Insurance Corp’s profit rises 5% to Rs 10,987 crore from Rs 10,461 crore a year earlier
- Jockey and Speedo licensee Page Industries profit climbs 21.5% to Rs 201 crore, tops forecasts
- Bharat Heavy Electricals Ltd Q1 loss widens to Rs 455 crore from Rs 213 crore a year earlier
- Adani Ports’ consolidated net profit rises 6.5% on-year to Rs 3,315 crore
- Hero MotoCorp profit flat at Rs 1,126 crore versus Rs 1,123 crore a year ago but beats forecasts of a fall
- Bajaj Auto profit climbs to Rs 2,096 crore from Rs 1,988 crore a year ago, tops forecasts
- Britannia profit inches up 3% to Rs 521 crore but lags analysts’ estimates
- Winemaker Sula’s consolidated net profit sinks 87% to Rs 1.94 crore from Rs 14.63 crore a year earlier
- PVR Inox consolidated loss narrows to Rs 54 crore compared with a loss of Rs 179 crore a year earlier
- Fevicol maker Pidilite’s consolidated net profit rises 18.6% to Rs 672 crore
- Divi’s Laboratories consolidated net profit climbs 26.7% to Rs 545 crore but misses analysts’ expectations.
Other Headlines
- AU Small Finance Bank gets universal banking licence from the RBI, the first in a decade
- Tata Consultancy Services to increases salaries of 80% employees after five-month delay
- HSBC India Services Purchasing Managers’ Index inches up to 11-month high of 60.5 in July from 60.4 in June
- IndusInd Bank names Axis Bank deputy managing director Rajiv Anand as new CEO
- Tata Motors CFO PB Balaji named CEO of Jaguar Land Rover, becoming the first India to take
- China’s Alibaba sells stake in Zomato parent Eternal and Paytm
- India’s foreign exchange reserves drop $9 billion to about $689 billion as RBI defends rupee
- SEBI proposes allowing investment advisors, research analysts to show past performance
- Billionaire Sunil Mittal’s promoter group firm to sell $1-bn stake in Bharti Airtel
- Adani Group to build 2.4GW coal-fired power plant in Bihar
That’s all for this week. Until next week, happy investing!
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