đź“°India Under Trump 2.0

Three big stories in Indian markets you can't miss.

January 21, 2025

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

  • What to expect from India under Trump 2.0,

  • Increasing competition in the food delivery space threatens to topple industry leaders,

  • and, major banks are set to ask the Reserve Bank of India to lessen liquidity regulations.

  • Finally, we’ll close with Gupshup, a round-up of the most important headlines.

Have a question you want us to answer? Fill out this form and you could be featured in our newsletter.

—Shreyas, [email protected]

Market Update

Today’s markets saw a huge selloff of 1.28 percent in the Nifty and 1.60 percent in the Sensex. Trump’s tariff threats on BRICs nations spooked investors.

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India In the Era of Trump 2.0

Alluding to an upcoming strong relationship, President Trump invited India’s foreign affairs minister, S. Jaishankar, to a front-row seat at his inauguration yesterday.  Jaishanker called the gesture a “great honor.”

India’s diplomatic strategy has historically been lauded by international relations experts as masterful, simultaneously able to blatantly follow its interests while being a friend to all. The most notable example is the Cold War, where India maintained a non-alignment strategy during the heated rivalry between the United States and USSR; to this day, Modi and Jaishankar were able to maintain strong relations with President Biden without ever condemning Russia’s attack on Ukraine, a serious violation of international order in the eyes of the U.S. diplomatic community.

Today is no different. Jaishankar’s front-row seat symbolizes India being able to be in America’s good graces regardless of who assumes the White House. Even Canada and Mexico, both long-time allies, peaceful neighbors, and major trading partners of the United States, all without being a major economic rival, are unable to accomplish the same.

The U.S.-India relationship is not without its hitches, especially recently. U.S. prosecutors alleged that agents linked to the Indian government conspired to carry out the assassination of an American citizen within the United States. Not long after, the Justice Department brought forward charges of fraud and bribery against India’s leading business tycoon, Gautam Adani. But, diplomatic ties between the countries stayed strong; as Biden’s outgoing Ambassador to India Eric Garcetti noted, “I’ve been pretty blown away with how trust can deepen through a challenge.”

India’s diplomatic success is largely thanks to its ability to know how to remain useful. After President Trump’s inaugural speech highlighted exacerbating the United States’ energy capabilities, India’s oil minister put out a statement that it would be a willing buyer of American oil. New Delhi also proactively began the process of deporting 18,000 illegal Indian immigrants living in the United States, who had been previously identified by the U.S. government. The country has also offered itself as a mistress to the devolving US-China supply chain partnership, now home to factories that will produce 15 percent of iPhones. 

Trump and Modi have an especially strong personal relationship. In 2019, Trump and Modi hosted a Texas-based rally where 50,000 attendees celebrated the two leaders. Trump has railed against India’s high tariffs, and India has shown a willingness to negotiate a favorable trade relationship. The U.S. has a $45 billion trade deficit with India, the exact type of trade imbalance Trump has promised to lower more broadly.

U.S.-India relations will be defined by reciprocity between its leaders, as per the Center for Strategy & International Studies. Trump 1.0 was highly favorable to India’s security, elevating the Quad (U.S., India, Japan, and Australia) to a recurring cabinet-level meeting, and heavily relaxing defense equipment exports to India. In exchange, India agreed to reduce hydrocarbon dependence on Iran and Venezuela. However, Modi and Trump both believe in shoring up domestic industry through tariffs, forcing the countries into a trade war that resulted in Trump revoking India’s trade privileges under the Generalized System of Preferences program (“GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States,” as per the USTR website). A Trump 2.0 presidency is an opportunity for India to gain a lot of favors from the American government in exchange for doing something that would already advance its manufacturing sector and attract investment: lowering tariffs. A true win-win.

Food Delivery Competition Threatens to Topple Leaders

Shares of Zomato Ltd. and its competitor Swiggy Ltd. experienced significant declines on Tuesday, following cautious earnings commentary from Zomato that raised concerns about growing competition in the quick-commerce sector.  

Zomato’s stock plunged nearly 11 percent to a six-month low after the company reported a 57 percent drop in quarterly profit and warned of continued losses in its sub-10-minute delivery segment. Swiggy’s shares also saw a sharp decline, falling a record 8 percent amid concerns over rising competition and profitability challenges.  

Quick commerce has come with a cost. Initially focused on daily essentials, the quick-commerce space has rapidly expanded into categories such as electronics, apparel, and general merchandise. Zomato-owned Blinkit’s aggressive push into this segment has intensified competition, prompting rivals like Swiggy and Zepto to scale up their operations. In November, Zomato raised $1 billion through an institutional share placement to fund the expansion of Blinkit. However, the expansion has come at a cost, with firms heavily investing in new delivery hubs, which has put pressure on profit margins.  

Despite retaining its long-term goal of achieving 20 percent annual growth in its food delivery business, Zomato has adopted a cautious stance for the short term. The company acknowledged that rapid store expansion could strain profitability in the next couple of quarters, as under-utilized stores weigh on margins.  

The RBI’s Liquidity Problem

India's major banks are planning to request concessions from the Reserve Bank of India regarding proposed liquidity regulations, arguing that the new rules could hinder their ability to boost lending.  

The lenders, through the Confederation of Indian Industry (CII), intend to ask the newly-appointed RBI Governor, Sanjay Malhotra, to delay the implementation of the revised Liquidity Coverage Ratio (LCR) norms, currently set to take effect on April 1. These regulations, introduced by Malhotra’s predecessor in July, require banks to allocate a larger portion of their deposits to sovereign bonds to safeguard against sudden withdrawals in the digital banking era. However, banks argue that complying with these norms could exacerbate the current liquidity crunch in the system.  

Despite recent steps to ease liquidity pressures—such as cutting the cash reserve ratio (CRR) in December and increasing cash injections via repo operations—banks believe additional measures are necessary due to slowing deposit growth and weaker economic momentum.  

Some of the bank’s issues are:

  • Deposit growth is lagging behind credit expansion with deposits growing at 10.2 percent y-o-y while credit has grown 12.4 percent y-o-y.

  • Implementing the new LCR norms would require banks to purchase government securities worth up to $46 billion (â‚ą4 trillion), as estimated by ICRA.  

  • The RBI's proposal to add an extra 5 percent run-off rate for deposits with digital banking access means banks need to hold additional high-quality liquid assets to cover potential withdrawals.  

So, they’re proposing:

  • Using the money already parked under the CRR to be counted towards LCR requirements, would reduce the burden of acquiring additional liquid assets. 

  • A phased rollout of the new rules instead of a hard deadline in April.  

The RBI has not yet responded to requests for confirmation of the meeting, while the CII has also remained silent on the issue. 

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.