In this edition, we talk about Starlink’s tie-ups with Reliance Jio and Bharti Airtel and why they are surprising. We also talk about IndusInd Bank’s shock revelation, the slowdown in mutual fund inflows, and what the latest inflation data shows.
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Competition is usually a good thing, many people believe. It challenges us, motivates us and forces us to put our best foot forward. In business and in the marketplace, it pushes companies and entrepreneurs to innovate and bring out new products and services. It also protects consumers from monopolies and oligopolies.
And then, there are people who say competition is overrated. Why compete when you can work together, right? Well, that’s certainly a point of view. And it’s a view that three of the world’s richest men came to share this week.
Billionaires Elon Musk, Mukesh Ambani and Sunil Bharti Mittal have decided to work together to provide satellite-based internet services in India. Musk’s Starlink this week signed separate deals with Ambani’s Reliance Jio and Mittal’s Bharti Airtel to use their retail stores to distribute its devices throughout India. Airtel and Jio will also provide installation and activation support for Starlink’s devices, and the two Indian companies may use Starlink’s network to increase coverage.
The two announcements came barely weeks after Prime Minister Narendra Modi met with Musk during his US visit and follow the planned entry of Musk’s electric vehicle company Tesla into India.
To be sure, the two deals are conditional upon Starlink getting the Indian government’s approval to begin operations and securing spectrum. But that now seems just a matter of time.
The two deals are surprising, to say the least. This is because, until recently, Ambani and Mittal were opposing Musk’s efforts to secure spectrum in India without auction, as we pointed out in our newsletter in June last year.
Moreover, both Jio and Airtel already have tie-ups or ownership interest in companies that compete with Starlink globally. Jio already runs a satellite internet joint venture with Luxembourg-based SES while Airtel’s parent company owns a stake in global satellite group Eutelsat. Jio and Eutelsat’s OneWeb have already received approvals to start commercial satellite broadband services. And Starlink will probably get it, too, soon.
Clearly, Starlink is the biggest winner here. The two tie-ups will not only provide it a readymade distribution network in India but will also make government approvals and spectrum allotment easier. The collaboration may benefit Jio and Airtel, too. As for the consumers, well, let’s wait and see.
Bank on It. Or Not!
When it rains, it pours. This certainly proved true for IndusInd Bank.
First came the sudden resignation of its CFO. Then, the Reserve Bank of India (RBI) granted its CEO only a one-year extension, instead of the three-year term sought by the bank’s board. And then came the real shocker.
The bank announced a discrepancy of about Rs 1,520 crore in its derivatives accounting—a revelation that could potentially wipe out its entire fourth-quarter earnings. This, the bank said, will hit its net worth by 2.35%. The final impact remains uncertain, pending an external review.
The market reacted sharply to the news. IndusInd Bank lost more than Rs 20,000 crore in market capitalization following the disclosure as its shares slid nearly 27% in a day, their biggest-ever drop. The stock had already lost some steam after the news about CEO’s shortened extension.
The stock crash also caught mutual funds off guard. A total of 38 mutual funds hold around 21.87 crore shares of IndusInd Bank in their portfolios. These shares were valued at Rs 21,630 crore as of February 28, 2025. By March 12, this had dropped by almost 39% to around Rs 13,200 crore.
During an analyst call, CEO Sumant Kathpalia hinted that the accounting discrepancy may have played a role in the RBI’s decision to limit his term’s extension. A news report went even further, suggesting that the regulator has already advised the bank to look for a new CEO and COO from outside the organization.
The bank maintains that it is adequately capitalized to absorb the hit. Even its promoter, the Hinduja Group, assured full support to the lender. However, concerns persist. The bank’s holding company has already pledged a significant portion of its assets to raise funds for other acquisitions, dampening investor confidence despite the reassurances.
Shifting Tactics
While IndusInd Bank was indeed a big shocker to mutual funds, the industry may now have another reason to worry. Data released this week by the Association of Mutual Funds in India (AMFI) showed that inflows into equity mutual funds slumped to their lowest level in 10 months in February as the stock markets continued to slip.
Inflows dropped 26% to Rs 29,303 crore in February from Rs 39,687 crore in January. A part of this drop can perhaps be explained by the fact that February has three days less than January. But that obviously can’t be the full explanation.
Stock markets have been in a bear grip for five months with the Sensex and the Nifty slipping about 15% from all-time highs in September and the smallcap and midcap indexes slumping 24% and 21% from their record highs.
This is starting to reflect on mutual fund investors’ appetite. The AMFI data showed that flows into largecap funds fell 6% to Rs 2,866 crore in February from Rs 3,063.3 crore in January but inflows into smallcap and midcap funds plunged 34% and 36% to Rs 3,722.5 crore and Rs 3,407 crore, respectively. Sectoral and thematic funds saw inflows drop 37%.
Monthly inflows via systematic investment plans (SIPs) declined to a three-month low of Rs 25,999 crore while the number of SIP accounts decreased to 8.26 crore from 8.34 crore in January. Meanwhile, the SIP stoppage ratio rose to 122% from 109% in January. This shows that more people stopped their SIPs than start new ones.
Clearly, mutual fund investors are adjusting their positions as they wait for a recovery and clearer signals related to the economy, corporate earnings, and foreign portfolio investors. How are you coping with the weakness in markets? Have you also reduced your investments or are you doubling down? Let us know!
The Core Issue
India’s retail inflation eased to 3.61% in February, slipping below the Reserve Bank of India’s (RBI) medium-term target of 4%. This strengthens the case for the central bank to cut its policy rate again after last month’s 25-basis-point reduction.
The cooling was primarily driven by vegetable prices, which fell as much as 11% from January levels. Overall, food inflation slowed to 3.75% from 6.02% in January.
However, there was one hitch: core inflation inched up to 4% from 3.7% in January—the first time this has happened in the current fiscal year. The RBI has stated that it primarily focuses on headline inflation, but a section of economists—especially those in government—has been advocating for the central bank to target core inflation instead.
This debate gained momentum after the Economic Survey for 2023-24 argued in favor of targeting core inflation. Several ministers and government economists also backed the idea. But what exactly sets core inflation apart? Core inflation excludes fuel and food prices, based on the premise that monetary policy has limited influence over these volatile components.
That said, advocates of this approach need to dig deeper—especially after the February data. If the RBI were to adopt core inflation targeting, it would have to turn more hawkish. Historically, except for a brief period when this idea gained traction, data suggests the RBI would have had to adopt a much tighter monetary stance (the February rate cut came after five years) had it targeted core inflation.
The bottomline is that, for now, we can expect the RBI to maintain an accommodative stance in its next policy meeting and potentially provide clearer forward guidance by shifting its policy stance from ‘neutral’.
However, let’s not jump the gun just yet—one more inflation reading is due before the next Monetary Policy Committee meeting. So, for now, we wait.
Growth Pills
India’s pharmaceutical industry has been under pressure for the past few weeks after Trump threatened to impose reciprocal tariffs on exports from the country. This is understandable given that Indian drugmakers get a big chunk of their business from overseas markets including the US and Europe.
But domestic drugmakers aren’t just shipping made-in-India products; they are also buying American and European companies to boost their presence in those markets. This week, as many as three Indian pharma companies did just that.
Sun Pharmaceutical was first off the blocks. It said on Monday that it will acquire Checkpoint Therapeutics, a US-based immunotherapy and targeted cancer-care company, from biopharmaceutical company Fortress Biotech for $355 million.
India’s biggest pharma company said the transaction will bring into its fold a US FDA-approved treatment for advanced skin cancer, called UNLOXCYT. Checkpoint is also seeking EU approval for its cancer immunotherapy cosibelimab.
A day later, Zydus Lifesciences said it will acquire an 85.6% stake in French medical devices maker Amplitude Surgical for 256.8 million euros (nearly $280 million). In the third deal, Biocon subsidiary Syngene said it acquired its first biologics facility in the US from a unit of Emergent BioSolutions for $36.5 million.
Market Wrap
India’s stock markets slipped again this week, after rising last week, as concerns of a global trade war continued to sour investor sentiment. Both the Sensex and the Nifty closed the holiday-shortened week with a loss of about 0.7%. Mid-cap and small-cap indices lost, too, falling 2.2% and 3.9%, respectively.
IndusInd Bank was the biggest loser as its shares plunged nearly 31% after it disclosed discrepancies in its derivatives accounts that would erode its net worth and dent its earnings.
IT stocks also took a strong hit on concerns of a trade war. Both Infosys and Wipro were down over 7.5% while Tech Mahindra lost more than 4% during the week. HCL Tech and TCS also ended in the red.
Consumer-focused Titan, auto stocks Mahindra & Mahindra and Hero MotoCorp, non-bank lender Shriram lender and state-run ONGC were among the other big losers.
Sun Pharma was the top gainer after it bought a US cancer drugmaker. Kotak Mahindra Bank and ICICI Bank were among the other winners, as was index heavyweight Reliance Industries. Tata Motors and ITC also closed in the green.
Other Headlines
- Godrej Agrovet to buy remaining 48% stake in Creamline Dairy for Rs 930 crore
- TCS to buy Darshita Southern India Happy Homes for Rs 2,250 crore, to set up delivery centre
- Retail inflation eases to 3.61% in February, lowest since July; lifts hope for rate cut
- India’s industrial output grows 5% in January versus 3.2% in December
- ArcelorMittal Nippon sues Indian govt over curbs on met coke imports
- Jaguar Land Rover drops plan to make EVs at Tata Motors’ India factory, reports Reuters
- Cairn India seeks joint venture partner to lift oil production
- Fitch assigns negative outlook to Adani Energy due to risks related to US bribery probe
- AGS Transact says trying to resume operations, moves half of its ATMs back to banks
- US crypto exchange Coinbase registers with India’s Financial Intelligence Unit to offer crypto trading services
- Eli Lilly to launch diabetes and weight-loss drug in India, other emerging markets this year
- Agriculture ministry says India wheat output to touch record 115.4 million tons this year
- Adani set to bag Rs 36,000 crore Motilal Nagar housing redevelopment project in Mumbai, reports Bloomberg
- Crizac, Borana Weaves get SEBI approval for IPOs
That’s all for this week. Until next week, happy investing.
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