📰India Braces for Geopolitical Oil Shock,Funds Pivot to Ultra-Long Bonds, IPO Surge

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:

Here’s what is in today’s newsletter:

• Funds pivot to India’s ultra-long duration bonds,

• Four companies are set to raise $1.7 billion (₹150 billion) in IPOs next week,

• and India takes proactive steps to insulate itself the Israel-Iran conflict.

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

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—Shreyas, [email protected]

Market Update.

Funds Pivot to India’s Ultra-Long Bonds.

India’s shifting monetary policy stance is prompting a strategic realignment in the domestic bond market, with fund managers increasingly turning to ultra-long sovereign bonds. The Reserve Bank of India surprised markets earlier this month with a larger-than-expected rate cut but simultaneously shifted its stance to “neutral,” effectively signaling the end of its easing cycle.

This move has significantly widened the yield curve, with the spread between 10-year and 30-year government bonds climbing to 77 basis points — its highest in nearly four years. For fixed-income investors, this signals a sweet spot: the 30-year bond offers a higher yield, and with rate cuts likely behind, long-duration bonds may now outperform.

“This is the time to think about when and how a policy reversal might happen,” said Manish Banthia of ICICI Prudential AMC. His firm is strategically positioning across both short and long maturities, reflecting the divergence in yield expectations.

The broader implication is that the Indian bond market is now pricing in a stabilization of monetary policy, and perhaps a shift toward normalization. Short-term bonds rallied in recent months as the RBI injected liquidity, but the central bank’s recent pause on cash infusions and hints of lifting money market rates have tempered that optimism.

For long-term investors, ultra-long bonds provide a hedge against policy volatility while capturing higher yields. As inflation moderates and the RBI faces limited room for further cuts, long-duration debt may become a favored asset class, reflecting both policy transition and broader economic confidence.

IPO Surge.

India’s equity capital markets are heating up, with a wave of IPO activity signaling a broader macroeconomic inflection point. At least four companies are set to raise nearly $1.7 billion (₹150 billion) next week, led by HDB Financial Services, a subsidiary of HDFC Bank, whose $1.4 billion (₹125 billion) offering would be the largest since Hyundai Motor India’s $3.3 billion (₹286.6 billion) IPO last year.

This burst of issuance reflects a confluence of supportive macro trends. A 12 percent rebound in the Nifty 50 Index from its March lows has revived investor risk appetite, while the RBI’s recent surprise rate cut and liquidity infusions have created a favorable backdrop for capital raising. As secondary markets rally, companies are racing to capitalize on improved sentiment and attractive valuations.

The IPO momentum also underscores the deepening of India’s capital markets as more companies seek to reduce reliance on traditional bank financing. With global investors looking to increase exposure to emerging markets, India’s combination of political stability, a growing middle class, and pro-reform policies has made it a preferred destination.

Upcoming listings from Kalpataru, Ellenbarrie Industrial Gases, and Globe Civil Projects point to growing sectoral diversity in the public markets, from real estate and industrials to finance, highlighting the broadening appeal of Indian equities. Meanwhile, LG Electronics’ plan to revive its India IPO further suggests international corporations are looking to tap into this liquidity-rich environment.

Together, these trends reflect a bullish turn in India’s investment cycle, with capital markets increasingly seen as a key driver of corporate expansion and economic growth.

India Braces for Geopolitical Oil Shock.

India is preparing contingency plans to shield its energy security from potential disruptions in the Strait of Hormuz, a critical chokepoint through which 20 percent of global oil flows. With tensions escalating between Iran and Israel, fears of a blockade have grown, prompting India to explore alternative crude sources and consider curbing refined-product exports to preserve domestic fuel stability.

Oil Minister Hardeep Puri emphasized that while India is not currently alarmed, it is taking proactive steps. “We have enough stocks [of crude and refined products],” he said, noting that India consumes about 5.5 million barrels of oil daily, of which roughly 1.5 million transit through the Strait. Any closure of this vital route, which handles about a quarter of the world’s oil trade, could send shockwaves through the global energy market.

From a macroeconomic perspective, India’s response underscores the vulnerabilities faced by oil-importing nations amid growing geopolitical volatility. While India has built strategic reserves and expanded its refining capacity, becoming a major exporter of petroleum products, it remains exposed to international price fluctuations and regional instability.

India’s potential move to reduce refined-product exports, which currently average 1.3 million barrels per day, highlights a shift toward prioritizing domestic resilience over export gains. Major private refiners like Reliance Industries and Nayara Energy, which supply markets in the U.S., UAE, and Singapore, may need to recalibrate operations if geopolitical risks escalate.

More broadly, this episode could accelerate India’s long-term energy diversification efforts, pushing for deeper investments in renewable energy, strategic reserves, and partnerships beyond the Persian Gulf. As global oil markets brace for uncertainty, India’s balancing act between energy security and global trade ambitions could shape regional policy responses and investor sentiment across emerging markets.

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Gupshup.

Macro

• The Indian rupee fell to a three-month low as surging oil prices fueled by Israel-Iran tensions heightened concerns over inflation and fiscal pressure. The 0.4 percent drop reflects broader weakness in Asian currencies, with rising crude posing a major risk for energy-import-dependent India.

• India’s largest companies are struggling with unpredictable weather, which is hurting sales and disrupting supply chains in the world’s biggest consumer market. A fourfold increase in extreme weather events over four decades has forced firms to seek better forecasting tools and adapt operations amid growing climate-related challenges.

Equities

• India’s IPO market is set to raise $1.7 billion (₹147.6 billion)  next week across four offerings, led by HDB Financial’s $1.5 billion (₹130.3 billion) deal. The rebound in listings follows strong equity market gains and central bank support.

• LG Electronics is considering reviving the IPO of its Indian unit as early as September. The $1.7 billion (₹147.6 billion) listing was paused earlier due to market volatility but may resume following a rebound in Indian equities.

• Indian IT stocks have overtaken infrastructure as the top pick among Asian funds amid easing US growth concerns and AI-driven optimism. This shift comes alongside a surge in luxury housing demand and signs of a looming price war in India’s paint sector.

• Nestle India will consider issuing bonus shares at a board meeting scheduled for June 26. This move is aimed at rewarding shareholders and potentially enhancing liquidity in the stock.

• Amazon will invest $233 million in India in 2025 to expand its operations infrastructure, develop new technology, and improve delivery safety. This investment builds on Amazon’s existing efforts to enhance its fulfillment network and reach across the country.

• Tata Consultancy Services (TCS) confirmed that none of its systems or users were compromised in the cyberattack on retailer Marks and Spencer, one of its long-term clients. The company assured that no other customers were impacted and that the investigation did not involve TCS systems.

Alts

• India’s upcoming Vadhvan Port plans to raise $3.5 billion (₹303.9 billion) in debt to fund construction. Set to be one of the world’s largest ports, it will support Modi’s infrastructure push and enable the docking of mega container ships.

• Blackstone’s ASK Group plans to hire 70 private bankers in India, aiming to grow its team to 175 by March 2026 amid rising competition in the country’s wealth management sector. The firm manages $6 billion (₹521 billion) in assets for over 3,700 families and seeks cautious hires aligned with its culture and long-term growth strategy.

• Larsen & Toubro may issue another ESG bond after its debut sale of $58 million (₹5 billion) at a 6.35 percent coupon was sold at a premium. This follows India’s recent introduction of an ESG debt securities framework.

• India’s National Bank for Financing Infrastructure and Development plans to raise up to $1 billion (₹86.8 billion) in its first overseas borrowing this fiscal year. The state-run lender aims to diversify funding sources through external commercial borrowings or dollar bonds, supporting the government’s infrastructure push.

• India’s $89 billion (₹7.7 trillion) clean industry project pipeline is struggling to secure financing, with only one project reaching a final investment decision in the last six months. The country faces challenges turning announcements into operational facilities, hindered by higher capital costs and a slow market for clean commodities compared to China and the U.S.

Policy

• India’s central bank will require lenders to set aside 1 percent of loans for under-construction infrastructure projects to cover potential losses, easing an earlier proposal of up to 5 percent. This rule, effective October 1, aims to address concerns over loan defaults caused by project delays and optimistic revenue forecasts.

See you Friday.

Written by Eshaan Chanda & 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.