📰Explained: The Maha Kumbh Mela Effect

Good afternoon, 

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

• The Maha Kumbh Mela may have added two percentage points to India’s GDP growth,

• The RBI has urged fintech firms and digital payment companies to focus on responsible innovation and stronger compliance,

• and Margin loans used for trading Indian equities have dropped to their lowest level since June.

Then, we close with Gupshup, a round-up of the most important headlines.

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—Shreyas, [email protected]

Market Update.

The Maha Kumbh Mela Effect.

The Maha Kumbh Mela, one of the largest religious gatherings in the world, saw an estimated 650 million Indians visit Uttar Pradesh in January and February, from across the country and around the world. The government now believes that religious tourism will lift GDP growth from 5.6 percent earlier in the year to 7.6 percent in the last fiscal quarter of 2025. The sheer scale of the pilgrimage required massive logistical efforts, including 4,000 dedicated buses, 1,000 special trains, and 81 new flight paths. Uttar Pradesh's CM claimed the event added $34 billion (₹3 trillion) in economic activity to the state, though some travel experts have questioned the accuracy of the visitor count.

Up or down? Chief Economic Adviser Nageswaran believes the “huge spending” associated with the Mela will drive growth in the January-to-March period. Early indicators such as indirect tax revenue and automobile registrations suggest a boost to Uttar Pradesh’s economy. However, broader national indicators like digital payments and currency circulation have not significantly increased.

Without the Mela’s boost, India would struggle to meet its 6.5 percent GDP growth estimate for the fiscal year.

Timing the [stocks] bottom: In the stock market, investors are also searching for signs of a bottom following a $900 billion (₹78.3 trillion) selloff. Three potential signals of a turnaround: valuations are at their cheapest in two years, the Nifty 50 index is at its most oversold level since the pandemic, and hedging demand is waning, suggesting reduced fear of further declines.

The RBI and Fintech Firms Start Collaborating.

The RBI has urged fintech firms and digital payment companies to focus on responsible innovation and stronger compliance while assuring them of a more consultative regulatory approach. Governor Malhotra met with non-bank payment system operators and fintech leaders in Mumbai on Wednesday, emphasizing the importance of compliance, especially for entities that are new to the regulatory framework. 

Why meet? The RBI acknowledged the critical role of new-age technology firms, including payment system providers and account aggregators, in driving India’s financial system and overall economic growth. The central bank reaffirmed its commitment to a collaborative regulatory approach, signaling a potential shift from the stricter measures implemented under former Governor Das. 

Malhotra’s remarks could bring relief to an industry that faced intense scrutiny in recent years. In a sign of regulatory easing, the RBI last month rolled back certain restrictive measures, such as requiring banks to set aside additional risk weights on loans to well-rated non-banking financial companies. Those risk weights forced lenders to hold more collateral against the loan in case of default. Rates were artificially inflated since lenders needed to make more money when they could not loan all deposits out.

Fintech perspective: During the meeting, fintech firms shared their perspectives on the evolving digital payments landscape and expressed their expectations from the RBI. This engagement suggests a more open dialogue between regulators and industry players, potentially fostering a more balanced approach to oversight and innovation in India’s fintech ecosystem.

Equity Derivative Use Continues to Crater.

Margin loans used for trading Indian equities have dropped to their lowest level since June, as traders cut leveraged bets amid a prolonged slump in the country’s $3.8 trillion (₹330.6 trillion) stock market. Outstanding margin loans have fallen 14 percent this year through the end of February to $8.2 billion (₹713.3 billion), according to NSE data.  

This decline in speculative liquidity adds to market volatility at a time when foreign investors have already pulled nearly $15 billion (₹1.3 trillion) from Indian stocks in 2025. The trend contrasts sharply with markets like Hong Kong, where retail investors have taken $353 billion (₹30.7 trillion) in margin loans amid a frenzy around new share sales.  

Other leverage use: The contraction in margin loans is attributable to the broader market correction, particularly in small- and mid-cap stocks. The sell-off has also dampened enthusiasm for leveraged trading in other segments, with retail participation in equity derivatives in January dropping to its lowest level since August 2023, according to the NSE.  

This marks a sharp reversal from 2024, when margin loan positions surged 67 percent to $9.5 billion (₹828 billion) by year-end, fueled by increased accessibility through smaller brokers. These facilities, offering up to four times leverage, gained popularity as a cost-effective alternative for traders looking to amplify bets. They saw large flows as regulatory crackdowns on options trading intensified.  

Keep in mind margin trading is a bull-market tool since it amplifies profits when stock prices are rising, but also magnifies losses when markets decline. Unless stocks stage a meaningful recovery, the margin loan book is unlikely to rebound in the near term.

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Gupshup.

Macro

• Indian bonds have avoided a global selloff due to $21.5 billion (₹1.9 trillion) of buybacks and forex swaps. Half of the money is going towards bond purchases of two specific issues. The rest is being used to sell rupees to banks in exchange for forward agreements. Indian yields have fallen by 3 basis points while global debt has seen yields soar, particularly in Europe.  

• ​​Wheat output is going to stay flat at 106 million tons. A risk is that northern harvests could be weaker due to rising temperatures and dryness. The overall haul is lower than market expectations of 110 million tons. Prices will likely stay high after already climbing 8 percent y-o-y — the government has to buy 31 percent of production from farmers for minimum guaranteed income.  

Equities

• Zomato, Swiggy, and Zepto face Indian antitrust from product distributors over predatory pricing. Quick commerce has hurt local sellers and distributors due to discounting on all goods. The predatory pricing helps delivery apps gain market share but hurts the actual goods seller who is gouged effectively. The quick delivery space was worth $200 million (₹17.4 billion) and is projected at $35 billion (₹3.1 trillion) by 2030. 

• Nayara, a Russian-backed refiner, announces a $217.5 million (₹18.9 billion) share buyback. Nayara operates a 400,000 barrels per day refinery with 6,500 gas stations across the country. This move is a not-so-subtle way of paying off its Russian benefactors Rosneft and United Capital Partners who combined own over 50 percent of Nayara.  

Alts

• Blackstone taps Citi for a $200 million (₹17.4 billion) debt raise for Kolkata mall. Citi is likely to syndicate the debt among local and global investors, including private credit funds. The loan facility will be denominated in rupees. 

• Unsold power projects worth 35 gigawatts are limiting green growth. The projects were supposed to be nationally tendered but are struggling to gain traction. To further complicate the issue, states are starting to sell the tenders making it less effective. Power distribution utilities showed losses of $80 billion (₹7 trillion) last year due to reneging on contracts too. 

Policy

• Jaishankar sees US relations as the best they've ever been amid tariff talks. There are currently trade talks being held with US counterparts to avoid reciprocal tariffs on April 2. He complimented Trump’s approach to keeping energy prices low and stable, a helpful policy for India. He also highlighted India’s approach to helping limit the Russia-Ukraine war behind closed doors through being an intermediary. 

• Indian execs believe the government has to counter US tariffs to limit export losses. Execs from engineering goods companies have lamented the 25 percent aluminum and steel tariffs which could heavily impact exports. There are $6.6 billion (₹574.2 billion) worth of metal exports from India to the US. Other industries like alcohol, autos, and pharma could also be impacted by April.  

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.