📰India-Canada Resume Trade Talk, SEBI's New Derivatives Rule, New Private Credit Deal

Good evening, 

Welcome to the best way to stay up-to-date on India’s financial markets. Today, we’re discussing

• Canada and India re-open trade talks,

• REMEMBER TO FILL IN,

• and India’s private credit market is booming.

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

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—Shreyas, [email protected]

Market Update.

India and Canada Reopen Diplomatic Channels as Trade Takes Priority.

India and Canada are taking steps to restore diplomatic ties after nearly two years of tension, as both nations seek to deepen economic cooperation amid growing global trade uncertainty.

In the first high-level contact since Canadian Prime Minister Mark Carney took office, Foreign Ministers Subrahmanyam Jaishankar of India and Anita Anand of Canada held a phone call on Sunday, signaling a thaw in relations. The call marks a significant shift in tone from both governments following a protracted diplomatic standoff.

Anand described the exchange as a “productive discussion” focused on strengthening bilateral ties and expanding economic cooperation, according to a post on X. Jaishankar, in a separate post, extended his best wishes to Anand, who was appointed Foreign Minister earlier this year.

Mending a fractured relationship: The renewed dialogue follows a series of diplomatic overtures from both capitals in recent months. In April, Indian Prime Minister Narendra Modi publicly congratulated Carney on his election victory, a move widely seen as a signal of willingness to reset ties.

Tensions between the two democracies escalated sharply in September 2023 after then-Prime Minister Justin Trudeau accused Indian intelligence agents of involvement in the killing of Hardeep Singh Nijjar, a Canadian citizen and Sikh separatist leader. India denied the allegations, calling them "absurd and politically motivated."

The diplomatic fallout included tit-for-tat expulsions of diplomats and a freeze in trade talks. But rising protectionist threats from the U.S., including potential tariffs that could impact both economies, have added urgency to reviving economic cooperation between Ottawa and New Delhi.

Trade, not turbulence: With global trade dynamics shifting rapidly, India and Canada appear keen to put their relationship back on stable footing. Both countries are members of the Indo-Pacific Economic Framework and have explored opportunities in energy, technology, and education.

Canada, which relies heavily on Indian students and skilled labor, is seeking to stabilize relations as part of a broader push to diversify its economic ties in Asia. India, meanwhile, continues to position itself as a key global manufacturing and technology hub, drawing interest from Western allies.

While no new agreements were announced following Sunday’s call, analysts see the resumption of direct communication between foreign ministers as an important step toward restoring trust and eventually resuming formal trade negotiations.

SEBI Limits Derivative Expiries to Tuesday/Thursday, Increasing Bourse Competition

To reduce risk in the stock market, the SEBI has decided to limit derivative expiry days to Tuesdays and Thursdays. As a result, the NSE plans to shift its derivatives contract expiries to Tuesdays from the traditional Thursday schedule, the same as the BSE, to compete for derivative traders looking for earlier expiration dates. The move comes as the NSE tries to bolster its relevance ahead of its upcoming IPO; the NSE already commands 90 percent of India’s trade volume, however, the BSE has raised its options market share from 1 percent to 26 percent in just one year (FY23), threatening the NSE’s dominance.

Tensions rise in a two-day derivatives market: With SEBI now limiting expiry days to just two per week, competition between India’s top bourses is expected to escalate. While BSE has built momentum with Tuesday expiries, NSE’s potential entry on the same day could dilute that advantage and redistribute volumes across both platforms.

SEBI warned that offering too many expiry dates could trigger “expiry day hyperactivity,” raising concerns about investor protection and systemic stability. The regulator’s tighter stance has prompted exchanges to consolidate their offerings and focus on more sustainable trading patterns.

IPO ambitions in focus: The expiry change also comes as NSE moves closer to a long-awaited public listing. The IPO will allow for owners of the NSE to be paid out and also give excess capital to invest in growth. For the NSE, shifting trading days could lead to more volume, revenue, and positive investor sentiment.

The exchange is preparing to pay a record $118 million (₹10 billion) to settle an ongoing regulatory case with SEBI, a move expected to clear the path for the IPO by securing a no-objection certificate. As the exchange gears up for its debut on the public markets, maintaining leadership in derivatives trading, its most lucrative segment, has become increasingly critical.

With application plans in motion and regulatory approval pending, NSE’s decision could reshape derivatives trading patterns in India and add fresh complexity to the already fierce battle for investor volumes.

Shapoorji’s Credit Deal Showcases a Booming Private Debt Market.

India’s private credit scene has just hit a new high. Shapoorji Pallonji Group, the storied construction and real estate conglomerate, has secured a record $3.4 billion (₹289 billion) private loan, marking the country’s largest-ever deal in the space. But even as investors jump at the 19.75 percent yield, questions around the collateral and the group’s financial strategy are testing confidence.

The boom of private credit: The deal reflects the rising global interest in India’s fast-growing private credit market, buoyed by a $1 trillion (₹85 trillion) government infrastructure drive and a growing appetite for non-bank financing. Global heavyweights like Cerberus, Farallon, and Ares Management were among roughly a dozen investors that backed the transaction, drawn by a rare opportunity to deploy capital at scale with high returns.

Leverage concerns: Yet the fine print reveals complexities. Most of the collateral for the loan hinges on Shapoorji’s $18.6 billion (₹1.58 trillion) stake in Tata Sons, the holding company of one of India’s most powerful business empires. The problem? That stake isn’t exactly liquid. Tata Sons’ board has the right to block share transfers, and its historical disputes with the Mistry family, owners of Shapoorji, are well documented.

Adding to investor caution is a regulatory shift. The Reserve Bank of India recently altered capital rules for certain holding entities, which could force Shapoorji to reserve more cash or risk triggering higher yield payments.

Despite these concerns, the deal’s loan-to-value ratio of 16 percent suggests investors see plenty of cushion. Backing the loan are also $3.6 billion (₹306 billion) in real estate assets and stakes in oil and gas ventures, which insiders say would likely be tapped before the Tata shares in a worst-case scenario.

Shapoorji is under pressure to deleverage and simplify its empire, having already spun off subsidiaries like Afcons and Sterling and Wilson Solar. A planned listing of its real estate arm could further boost cash flows.

While Deutsche Bank acted as the sole bookrunner, helping investors navigate the deal’s intricacies, some are still wary, especially after a related Shapoorji entity, Goswami Infratech, requested more time to repay a 2022 junk bond. That deal saw its yield step up to 20.75 percent after delays in asset sales.

For Shapoorji, the financing buys time, two to three years, according to Dharni Capital’s Hemant Dharnidharka, to restructure and reposition. For the broader market, it’s a litmus test for how far investors are willing to go in pursuit of yield in Asia’s most dynamic private credit arena.

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Gupshup.

Macro

• India is debuting a weather model to help farmers. The model should forecast at a resolution of 3.7 miles to double the amount of rainfall detail compared to previous attempts. Predicting rainfall in the tropics is still a difficult task, but an improved solution should help crop sowing and reaping.

• Short-term sovereign bonds continue gaining. The RBI approved a $32 billion (₹2.7 trillion) dividend payout to the government, which will boost liquidity. Short maturity bonds have outperformed the rest of the yield curve since the RBI, with less cash on hand, will have to cut back on its open-market operations, which have focused on long-duration bonds.

Equities

• IndiGo's owning family is seeking $803 million (₹68.7 billion) from selling a 3.4 percent stake in the business. The stake sale is at a 5 percent discount to the true value of the shares; the buyer would be restrained with a 150-day lockup period when the sale goes through.    

• Equity traders are monitoring the distribution of rainfall for export and rural consumption companies. India has a key global role for rice and sugar, plus companies like Unilever apply heavily to rural consumers. Equal distribution is beneficial for those companies since unequal rainfall leads to different amounts of spending. 

• Radico Khaitan and Piccadily Agro are focusing on premium single-malt whiskey to grow market share. Both alcohol companies are banking on global demand, which has severely outpaced supply. Most alcohol stocks, globally, have fallen this year, but premium offerings could boost Indian companies, which have typically shied away from the space.   

Alts

• Indian agencies detected an oil spill that is now being contained. A Coast Guard aircraft first detected the container spill near Kerala and have already rescued all 24 members of the ship’s crew.  

• The NSE is offering a record $118 million (₹10 billion) to settle with SEBI. The case stems from 2015 allegations that some traders were given preferential co-location benefits to trade at faster speeds. The NSE is looking to IPO, but cannot until this case is settled or adjudicated. 

• JSW is buying a $74 million (₹6.3 billion) coal deposit in Mozambique. The deal had been a year in the making when JSW first ran into legal troubles with the government. The company has been buying new industrial assets outside of India to diversify and grow its interests.  

Policy

• India and Canada are holding talks between their foreign ministers to mend frayed ties. These are the highest-level communiques since Carney took the PM seat. Both countries want to strengthen trading ties after the US tariffs. Diplomatic relations went cold after former PM Trudeau accused India of planning the assassination of a Sikh separatist.  

See you Tuesday.

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.