Welcome to Samosa Capital’s evening briefing — the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

• RBI’s Governor has been replaced,

• How India’s government’s reporting has lost trust,

• And, Adani and Modi appear together to announce major investments.

Finally, we’ll close with Gupshup, a round-up of the most important headlines.

If you have feedback on our newsletter or just want to chat about India, always feel free to reach out to me. You can also share criticism about the newsletter anonymously here.

—Shreyas, [email protected]

Market Update

U.S. CPI printed at 2.7 percent y-o-y inflation for November, a step in the wrong direction for the Federal Reserve, though not overly alarming. India’s benchmark stock indices stayed flat on the news. India is also going to report inflation a day later on the 12th, which has led to more traders staying on the sidelines. Other asset classes have started pricing in anticipation of rate cuts, with bonds moving up a few basis points and the rupee falling to another all-time low at 84.87.

Live Event

Corridor Connect is hosting a US - India Investment Mixer tomorrow, December 12, at 6PM. The event will be at 848 Washington Street, Manhattan, New York. See details and join WhatsApp group here.

Seats are running out for our upcoming “Future of India” expert panel and networking event on Wednesday, February 12, 2025, in New York City. Buy now here, or earn a free ticket by sharing Samosa Capital with three friends.

Goodbye Das, Hello Malhotra

The new RBI chief: Sanjay Malhotra, a Princeton-educated expert who spent three decades in the Indian civil service, has been appointed as the RBI Governor, replacing Shaktikanta Das, whose six-year term ended yesterday (Dec 10). Malhotra, who will be the 26th governor of the Indian central bank, was previously the revenue secretary and made a name for himself in modernizing and simplifying the tax code.

This is weird: Malhotra is the second bureaucrat to hold the top monetary policy post, the first being his predecessor. Rather than being a lifelong academic (Das’ predecessor RBI Governor Raghuram Rajan was a life-long academic and cut his teeth as the IMF’s chief economist), Malhotra likely won the spot by currying favorability from Finance Minister Sitaraman and Prime Minister Modi. Malhotra breaks from his predecessors in never having obtained a PhD, though. 

So, what does he stand for? “Don’t kill the golden goose,” Malhotra would tell his employees when he ran the Finance Ministry’s revenue team. “Revenue comes in only when there is some income,” showing Malhotra’s bias towards ensuring the government doesn’t get in the way of economic growth. This is a bold view as far as Indian economic policy goes. While his views on rates are unknown, economists tell Bloomberg they do not expect changes in the RBI’s approach under his administration. Barclays’ economist Aastha Gudwani says he will continue a “practical approach.” Malhotra will be more of the same.

Can You Trust India’s GDP Numbers?

What is happening: In his piece titled India Shouldn’t Let Its Data Turn Chinese, Bloomberg columnist Mihir Sharma points out that the Indian government’s data is no longer trusted the way it once was. Now, similar to how analysts supplement the Chinese government’s reporting, look to third-party surveys, statisticians, and economists to get a true understanding of India’s economic story. For some reason, India’s institutions have lost the truth they once garnered, and even weirdly, it doesn’t seem to be a big deal for them.

This is weird: Independent data reporters have begun showing large departures in their economic reporting vs what is coming out of the government. However, unlike China — which aimed to inflate its performance — India’s problem is arguably more troubling: incompetence. Indian government economists have been unclear about the datasets they are using and their calculation methodologies.

Okay, so: The Indian government says this is because its GDP figures are based on 2012 currency values, and has promised to update them. But it is unclear if that is all there is to it: value-added figures from the private sector seem to be totally “out of sync with other macroeconomic indicators — corporate earnings, credit growth, the central bank’s estimates for capacity utilization in industry,” Sharma writes.

Unless Indian statisticians can overhaul the system, the quiet growth of disregarding Indian government numbers in favor of more reliable yet still incomplete data sets collected by independent companies will hurt the country’s trust among domestic and international investors.

Adani Unveils New Investment Plans While Shedding American Financing

Sitting with Modi: Modi and Adani attended an investment event in Jaipur, where Adani announced plans to invest ₹7.5 trillion ($88.5 billion) in Rajasthan through Adani Ports and SEZ Ltd., with half to be deployed in the next five years. Adani is looking to improve his image and political capital to continue growing his conglomerate business — especially as Adani’s business practices come under increased scrutiny from U.S. regulators.  By sitting alongside Modi and announcing projects that achieve his key goals in green infrastructure, Adani solidifies his role as Modi’s most important builder.

They’re building: a huge green ecosystem with 100 gigawatts of renewable energy, 2 million tons of hydrogen, and 1.8 gigawatts of hydroelectricity. 

But: financing plans remain undisclosed, and it is likely details of the plan are still being ironed out.

Behind the scenes: Adani has pulled out of a $553 million (₹46.8 billion) U.S. DFC loan for its Colombo ports project. To keep the portrayal of strength built up from the Rajasthan event, the joint venture behind the project quickly put out a statement about internal financing.

Gupshup

Macro

• Government bonds are expected to move higher with the 10-year rate falling to about 6.50 percent by March 2025. This is due to more dovish expectations with a changing MPC and slowing growth expectations. At the same time, the rupee has moved down to an all-time low of 84.87 which has derailed plans of intervention. 

• Investors ask the RBI for state debt to be sold as zero-couponrather than through coupon bonds. In particular, they want the RBI to utilize STRIPs (which take the coupon bond and turn it into a series of zero coupon bonds representing coupons and principal) as long-term savings products. STRIPs give an extra 30 to 40 bps spread over typical products.

Equities

• Continuum Green Energy is filing for a $430 million (₹36.5 billion) IPO to fulfill the need for growing CapEx on their green projects. The company is yet to turn a profit with the last 12 months' loss being $70.9 million (₹6 billion).

• Amazon has been testing 15-minute delivery in what is becoming one of their most important markets. E-commerce is still a fledgling industry but has grown rapidly from 2020 onwards. Amazon has also earmarked $120 million (₹10.2 billion) for investing in startups in the same vertical to cement a technological advantage.  

• Air India has confirmed an order for 100 jets. Air India is purchasing $6.4 billion (₹541.4 billion) worth of planes from Airbus. Since Tata bought the airline in 2022, they have been focused on increasing topline to achieve growth, especially through more plane purchases. 

• India is bringing its top 500 stocks under a same-day settlement regime. These 500 firms account for more than 97 percent of the $4.7 trillion (₹398.6 trillion) market. This change should lure investors who currently trade derivatives (giving more leverage and risk) to do equities since they can spend and receive their cash all in a single day.  

Alts

• Japan's megabucks are hunting for deals in India. Several Japanese banks are flush with cash because they are enjoying great earnings. The banks have been buying stakes in local companies to earn outsized returns as they are under pressure from the Tokyo Stock Exchange to increase valuations. 

• IT firms have been outsourcing human capital from the US to India en masse by using H-1B visas. Several of these IT firms in the US now face litigation because there is fear that companies are gaming a broken visa system. This trend has happened in India as well with one of the country’s largest exports being IT services. 

• Adani's troubles could end a price war in energy since deal-flow will finally slow and return to normalcy. An example has been the concrete industry, where Birla’s competition with Adani led to concrete firms seeing return on invested capital drop below 10 percent. Adani forces other players to lower prices extremely leading to falling returns at astounding levels.  

• Adani needs concessions from the government for its troubled $2 billion (₹169.6 billion) coal-fired power plant. Adani has been struggling with the plant since it primarily supplies energy to Bangladesh which has been behind on payments. Domestic sales have been hampered since the plant is in a special economic zone, so the company has asked for the removal of the SEZ or capital reimbursements.

Policy

• Bangladesh’s Yunus is meeting with diplomats to temper both nations’ feud over the last few weeks. Complaints on India’s end have been due to what are described as unprovoked attacks on Indians due to former Prime Minister Hasina being ousted. 

• Indian police have reached out regarding Starlink. The internet device company helped smugglers navigate $4.2 billion (₹355.3 billion) worth of drugs inadvertently. This comes as a setback since Starlink just won a lobbying battle against Mukesh Ambani for distribution of their satellite services. 

• India's antitrust body is trying to expedite cases against e-commerce giants to settle a probe quickly. They want the Supreme Court to intervene so that the investigation into Amazon and Walmart can be ended since other players have been trying to delay the probe to hurt both conglomerates.  

See you Friday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.