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đź“°RBI Lays Out 2025 Plans, Zomato and Jio Join Nifty50, India Adds Tariffs

Three stories on Indian markets that you can't miss.

February 24, 2025

Good evening, 

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

  • RBI Governor Malhotra outlines plans for 2025,

  • The NSE is adding Zomato and Jio to the Nifty50,

  • and India will protect farmers through vegetable oil tariffs.

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

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—Shreyas, [email protected]

Market Update.

Governor Malhotra Lays Out 2025 Plans

Every month, the RBI releases a bulletin featuring research, speeches, and memos that reflect the central bank’s thinking for the coming months. This month’s bulletin opened with an analysis by RBI Governor Malhotra justifying the recent 25 basis point reduction in the repo rate to 6.25 percent. At the same time, the discount rate remained at 6.50 percent, while the reverse repo fell to 6 percent. Specifically, Malhotra made his argument for how he intends to adjust the governing framework of the RBI:

Flexible Inflation Targeting (FIT) was labeled a success after Malhotra noted that average inflation has remained lower post-implementation in 2016. He added that the RBI will enhance it with new data, updated forecasting models, and dynamic macroeconomic probability-weighted outcomes. While not explicitly stated, the changes will likely come due to how inflation is calculated in India with supply-side too highly weighted with a key example being food. This makes RBI rate-setting skewed towards restriction in its current state. 

Regulation: Malhotra emphasized refining bank coverage ratios, expected credit loss provisions, and norms for projects under implementation. The RBI wants to examine how much cash banks keep on hand for bank runs or non-performing assets and take an active role in identifying new projects. As intrusive as this sounds, Malhotra maintains that the RBI will take a “consultative approach” rather than an overly direct one to regulation-making.

The global economic backdrop remains challenging, with slower growth projections and capital outflows impacting emerging markets, including India. Despite these challenges, India’s real GDP growth is projected at 6.7 percent for 2025–26, driven by robust agricultural output, recovering manufacturing activity, and sustained services sector performance. CPI inflation is forecasted at 4.2 percent for the same period, assuming a normal monsoon.

The NSE is Adding Zomato and Jio to the Nifty50

India’s largest stock exchange, the NSE, announced that Zomato and Jio Financial Services will be added to its flagship Nifty 50 Index on March 28. This inclusion highlights the growing influence of new-age technology companies in India’s equity markets, signaling broader acceptance by mainstream investors.  

Who’s getting kicked out? Zomato, a leading food and grocery delivery platform, and Jio, a financial technology firm and subsidiary of Reliance Industries, will replace Britannia Industries and Bharat Petroleum in the index. This marks the first time digital-era stocks have been included in India’s most tracked equity gauge. Notably, Zomato had already secured a spot in the BSE Sensex late last year.  

The move reflects the increasing clout of young, tech-driven Indian firms catering to a rising base of affluent and tech-savvy consumers. Since Zomato’s landmark public listing in 2021, other digital companies like Ola and Swiggy have also made their stock market debuts, underlining the sector’s growing prominence.  

A few issues. Despite the significance of this milestone, both Zomato and Jio have faced headwinds. Combined, the two firms have lost over $20 billion (â‚ą1.7 trillion) in market value from last year’s peak, with Zomato grappling with slowing consumption and tough competition, while Jio encounters scrutiny over its high valuations.  

Keep in mind that Nifty reshuffling will drive renewed investor interest with Zomato expected to see $630 million (â‚ą54.6 billion) in passive fund inflows and Jio potentially attracting $320 million (â‚ą27.7 billion). These passive flows are required since ETFs tracking the Nifty will have to rebalance their holdings. On the flip side, Bharat and Britannia will likely lose a great deal in market cap due to forced selloffs.

India will Protect Farmers with Vegetable Oil Tariffs

India is likely to increase import duties on vegetable oils for the second time in less than six months, aiming to support domestic oilseed farmers grappling with plunging prices, according to two government sources. As the world’s largest importer of edible oils, India’s move could boost local oilseed prices but may also curb demand and reduce imports of palm oil, soy oil, and sunflower oil. Remember that vegetables and vegetable oil consequently have been one of the main sources of inflationary pressure.  

Government sources say that the inter-ministerial meetings regarding the duty hike are already complete which suggests the taxes are imminent. However, officials are weighing the potential impact on food inflation before finalizing the decision.  

In September 2024, India raised the basic customs duty on crude and refined vegetable oils, resulting in a 27.5 percent import duty on crude palm, soy oil, and sunflower oil — up from 5.5 percent — and a 35.75 percent tax on refined oils. Despite these measures, domestic soybean prices remain more than 10 percent below the state-fixed support price of $56.45 (â‚ą4,892) per 100 kg, currently trading at around $49.64 (â‚ą4,300).  

Directors at the Solvent Extractors’ Association of India continue to emphasize the need to support farmers in sustaining their interest in oilseed cultivation. The expected duty hike has already influenced market behavior, with Indian refiners canceling orders for 100,000 metric tons of crude palm oil scheduled for delivery between March and June. India fulfills nearly two-thirds of its vegetable oil demand through imports, sourcing palm oil from Indonesia, Malaysia, and Thailand, and soy oil and sunflower oil from Argentina, Brazil, Russia, and Ukraine.

Okay, but wait… The move illustrates another example of the government claiming to keep inflation as a top priority, yet legislating supply-side restrictions to the highest contributor to the CPI basket, foodflation, to boost incomes. In considering this policy, it is important to remember that the RBI keeps rates high because of persistent inflation, but has access to few levers that keep foodflation down. In short, the policy increases short-term incomes for a select few but comes at the cost of slowing broader economic growth.

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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.