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đź“°India's Corporate Bonds See Record Inflows

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

June 10, 2025

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:

  • Bond mutual funds see highest inflows in two years,

  • Maruti Suzuki cuts production expectations,

  • and Benchmark indices traded relatively flat.

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

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—Shreyas, [email protected]

Market Update.

India’s Corporate Bond Funds See Record Inflows.

India’s corporate bond market is witnessing a resurgence, with bond mutual funds attracting their highest net inflows in over two years. Investors, particularly banks flush with surplus cash, are increasingly turning to company debt for higher returns, short durations, and relative stability amid a shifting monetary landscape.

According to the Association of Mutual Funds in India, corporate bond funds saw a net inflow of $1.4 billion (â‚ą119.8 billion) in May 2025. This is the highest monthly inflow since March 2023 and marks the second consecutive month of positive momentum for funds focused on high-rated corporate debt (AA+ and above).

Banks lead the charge: The surge is widely attributed to India’s banking sector, which has been seeking efficient avenues to deploy excess liquidity. “This inflow could be largely from banks, which may be parking their excess liquidity,” said Dhawal Dalal, Chief Investment Officer for Fixed Income at Edelweiss Asset Management. “It may be a tactical call they may have taken and may remain invested for some time.”

This influx follows the Reserve Bank of India’s recent shift in policy stance and surprise liquidity infusion aimed at bolstering economic growth. The RBI’s move toward a neutral policy outlook—paired with attractive yields on corporate bonds compared to government securities—has further boosted the appeal of corporate debt, particularly those with shorter maturities.

Shorter tenor bonds in focus: Investors appear cautious about locking into longer-duration debt as interest rate expectations recalibrate. Venkat N Chalasani, CEO of AMFI, noted, “The inflows might continue but we see it more in shorter end than into longer duration bonds.”

Mixed signals across categories: While corporate bond funds surged, the broader mutual fund landscape showed a shift in investor behavior: Equity fund inflows dropped to $2.22 billion (â‚ą190.1 billion), the lowest in a year and 55 percent below their October 2024 peak. Hybrid funds, which blend equity and debt instruments, outperformed equity funds in inflows for the first time in over a year. Overnight and liquid funds saw outflows, while money market funds received $1.3 billion (â‚ą112.2 billion). Monthly investment plans (MIPs) reached a record $3.1 billion (â‚ą266.9 billion) in contributions, underscoring a growing appetite for systematic, long-term investment strategies.

Maruti Suzuki Cuts Near-Term EV Production Amid Rare Earth Mineral Crisis.

Maruti Suzuki, India’s leading carmaker, has announced cuts on near-term production targets for its first electric vehicle, the e-Vitara, by nearly two-thirds due to persistent shortages of rare earth minerals, a company document reviewed by Reuters revealed. The move underscores growing challenges in the global auto industry stemming from China’s stringent export controls on critical raw materials.

Maruti Suzuki assembly plant in Haryana, India. Via Reuters.

Initially aiming to produce 26,500 e-Vitaras between April and September, Maruti now plans to manufacture approximately 8,200 vehicles during this period, according to the document. These rare earth minerals are essential components in magnets and other high-tech parts crucial to electric vehicle manufacturing.

A positive spin: Despite the near-term setback, Maruti remains confident in hitting its annual EV output target of 67,000 units for the fiscal year ending March 2026 by accelerating production in the latter half of the year. The revised plan calls for ramping up production to nearly 58,700 e-Vitaras between October 2025 and March 2026, significantly higher than the original target of about 40,400.

China’s curbs on rare earth exports have rattled automakers worldwide, sparking warnings of severe supply chain disruptions. While manufacturers in the US, Europe, and Japan have begun to see some relief after securing export licenses from Beijing, India is yet to receive similar approvals, raising concerns about potential production bottlenecks.

Launched amid considerable fanfare at India’s premier auto show in January, the e-Vitara represents a critical component of Maruti’s electric vehicle strategy. It also aligns with the Indian government’s goal of increasing EV sales to 30 percent of the country’s total passenger vehicle market by 2030, a sharp rise from roughly 2.5 percent last year.

Broader impacts: This production cut could also impact Suzuki Motor, Maruti’s Japanese parent company, for whom India is a key revenue market and an important EV manufacturing hub. The majority of e-Vitaras produced in India are destined for export to Suzuki’s major markets such as Europe and Japan, with shipments expected to start in summer 2025.

While Maruti had previously downplayed the rare earths shortage’s impact on the e-Vitara launch timeline, local media reports quoted company Chairperson R.C. Bhargava saying there was “no impact at the moment” on production. However, the latest document and supply chain sources suggest the company is adjusting its near-term manufacturing plans to navigate supply constraints.

Shares of Maruti Suzuki on the Indian stock exchange declined as much as 1.4 percent following the news.

Competitive pressures: The company has yet to open bookings for the e-Vitara, with analysts cautioning that Maruti may be trailing competitors in India’s rapidly growing EV market. Tesla, for example, is expected to launch its vehicles in the country later this year, intensifying competition.

Maruti’s challenges come as it works to regain market share lost to rivals Tata Motors and Mahindra & Mahindra, both of which lead the EV sales race with feature-rich SUVs. Maruti’s share of India’s passenger vehicle market has dropped to 41 percent from a high of about 51 percent in March 2020.

In response to these pressures, Suzuki has revised its India sales target downward to 2.5 million vehicles by March 2031, down from an earlier goal of 3 million. The company also cut back its planned EV launches from six models to four, reflecting the tougher competitive landscape in the country.

Indian Markets Pause as Financials Pull Back, Despite Broader Optimism.

Indian equities treaded water on Tuesday, with benchmark indexes ending largely flat as profit-booking in heavyweight financial stocks offset gains driven by optimism surrounding U.S.-China trade negotiations and continued domestic policy support from the Reserve Bank of India.

The Nifty 50 closed nearly unchanged at 25,104.25, while the BSE Sensex slipped marginally by 0.06 percent to â‚ą82,391.72. Both indices had opened higher, gaining around 0.4 percent in early trading, before losing momentum later in the session.

Financials weigh on rally: The primary drag came from financials and banking stocks, sectors that had seen strong gains in recent sessions. Financial stocks collectively lost 0.5 percent, while banks slipped 0.4 percent. Notably, HDFC Bank fell 0.7 percent and ICICI Bank dropped 0.8 percent, contributing significantly to the day's subdued performance.

These declines follow a four-day rally in which the Nifty and Sensex climbed about 2.3 percent, reaching their highest levels since October 2024. Analysts flagged the current downturn as a typical bout of profit-taking after the run-up. “Valuations are stretched after the recent rally, making time correction and bouts of profit-taking likely in the near term,” noted Amit Jain, co-founder of Ashika Global Family Office.

Indeed, rate-sensitive sectors like financials had led recent gains, with the banking index hitting a record high on Monday after rising 2.2 percent over four sessions.

The biggest gainers: Grasim Industries surged 3.7 percent after Morgan Stanley raised its price target to $40.90 (₹3,500) and named it its top pick. Coforge climbed nearly 2 percent following JPMorgan’s reiteration of its bullish outlook on the IT firm for fiscal 2026. Meanwhile, Tata Power rose 1.7 percent as its solar division surpassed 4 gigawatts of module production capacity at its Tamil Nadu facility, signaling strong momentum in clean energy manufacturing.

Broader market remains subdued: Smaller domestic companies followed suit, with mid- and small-cap indices showing little movement. Of the 13 major sectoral indices, seven ended the day in the red, highlighting the lack of broad-based bullish sentiment.

Elsewhere, global markets provided a more positive backdrop. Asian shares rose on expectations of progress during the ongoing U.S.-China trade talks, which entered their second day on Tuesday. Indian IT stocks, which derive a substantial portion of revenue from U.S. clients, benefited from the optimism, gaining 1.7 percent as a group.

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Gupshup.

Macro

Equities

Alts

Policy

See you Wednesday.

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.