People stand in front of a Book Financial institution of India logo design at the Worldwide Fintech Feast in Mumbai, India, 5 September, 2023.
Niharika Kulkarni|Nurphoto|Getty Images
This record is from today’s CNBC’s “Inside India” e-newsletter which brings you prompt, informative information and market discourse on the arising giant and the industries behind its speedy increase. Like what you see? You can subscribe here.
The large story
Bureaucrats, stereotypically yet possibly unjustly, are frequently viewed as relocating as well gradually. Rather, there’s been a flurry of task this month at a variety of regulatory authorities throughout India’s economic system.Â
As the South Eastern nation’s economic markets advance and broaden, the Stocks and Exchange Board of India (SEBI) and the Get Financial Institution of India (RBI) have actually been proactively carrying out brand-new rules.Â
They say it’s  to make sure the security and stability of the markets.Â
One location that has actually captured their focus is the quickly expanding by-products market, specifically futures and choices trading.Â
In 2023, greater than three-quarters of the 108 billion choices contracts traded globally got on Indian exchanges,  according to information from the Futures Market Organization. The considerable rise over the previous 5 years has actually been generally sustained by retail capitalists,  with the increase drawing the focus of elderly politicians.Â
” Any type of untreated surge in retail trading of futures and choices can produce future difficulties, not simply for the marketplaces, however, for financier view and home financial resources,” Nirmala Sitharaman, India’s financing preacher, informed a sector seminar this week.Â
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SEBI, however, late last month had asked exchanges to pay higher regulatory fees, a move which tanked the shares of the Bombay Stock Exchange by nearly 20% on the following trading day.Â
Similarly, regulators have also banned 80% of the trading activity in the currency futures market to stamp out volatility in the Indian rupee.
Another area of focus for regulators has been the IPO market for small and medium-sized companies.Â
SEBI, to protect minority shareholders and to prevent the misuse of a listing platform introduced in 2012, is now considering raising the minimum size of such public offers so that it’s limited to only “serious companies”, Reuters reported this week.
Despite the steady stream of regulations, some of these new rules are being welcomed by investors.
The central bank, for example, proposed that lenders set aside higher loan loss provisions for infrastructure projects retrospectively.Â
That frightened bank investors and immediately knocked off more than 3% from the India Nifty PSU Bank index.
“RBI has been tightening the screws,” Rajeev Agrawal, hedge fund manager and managing partner at DoorDarshi India Fund, told CNBC’s Inside India.Â
The investor believes that intervention in this instance is justified since the regulator might be concerned that credit growth has been too fast and could lead to a “bubble” in asset prices.
The central bank’s move comes in light of the large defaults across infrastructure loans starting in 2012-2013, which strained the country’s banking system.
“I think it’s perfect, because it ensures that that system is safe,” Agrawal added.
Need to know
India ‘very favorable’ for IPOs. Shailendra Singh, managing director at Peak XV Partners, formerly Sequoia Capital India & Southeast Asia, told CNBC that India has created “a very favorable environment” for companies to go public. There were 220 IPOs in India last year, up 48% from 2022, making it the second-largest IPO market in the world.
India is still relying heavily on coal. According to a new report by energy think tank Ember, India generates 78% of its electricity from fossil fuels, with coal making up 75% of that mix. The country’s leaders have been optimistic about its path to net zero, making bold claims that 50% of its power generation will come from non-fossil fuel forms of energy by 2030.
The fallout between Maldives and India is benefiting Sri Lanka. A social media row in January resulted in a sharp drop in Indian visitors to the Maldives this year and is “absolutely” helping Sri Lanka’s travel industry, according to the country’s tourism minister. Nearly 34,400 Indian travelers went to Sri Lanka in January, more than double the 13,759 that visited in January last year.
India’s mid-cap stocks are in a ‘bubble’. [Subscriber content] On CNBC Pro, the portfolio manager behind a $3.1 billion Asia ex-Japan fund revealed that they’ve nearly exited the country. The fund manager said it’s impossible to justify current stock prices, even when accounting for “aggressive assumptions” about future growth.
What happened in the markets?
Indian stocks have partially rebounded this week after a 2% decline last week. The Nifty 50 is up 1.5% so far this week. The index has risen 3% this year.
The 10-year Indian government bond yields have fallen in the last week to 7.08%. The Indian rupee has remained nearly flat against the U.S. dollar over the past week.
What’s happening next week?
The elections will continue next week with the fifth phase starting on Monday. Voting is staggered in phases until June 1 and counting starting a few days afterward.
Next week, Go Digit Insurance, which counts former Indian cricket captain Virat Kohli as an early investor will go public on Thursday.
