📰India-US Trade Update, India's Net Zero Target Threatened, Indusland Bank Investigated

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:

• Details emerge about ongoing US-India trade negotiations,

• India’s aggressive expansion of coal-based steelmaking capacity is putting global decarbonization efforts at risk,

• India’s market regulator is investigating six senior officials at IndusInd Bank, India’s fifth-largest private lender.

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

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—Shreyas, [email protected]

Market Update.

India Eyes Multi-Phase US FTA Amid Tensions and Deadlines.

India is working toward a multi-phase trade deal with the United States, aiming to finalize an interim agreement by July as a deadline for reciprocal US tariffs looms. The proposed deal, structured in three stages, reflects a pragmatic approach to navigating increasingly complex trade dynamics while managing domestic sensitivities and international pressures.

According to Indian officials familiar with the matter, the initial tranche of the agreement would focus on market access for industrial goods, select agricultural products, and easing certain non-tariff barriers, such as quality certification and regulatory compliance. These early deliverables are designed to signal progress and goodwill between the two countries, particularly as global trade alliances undergo realignment.

Negotiation concerns: The negotiations are still in flux. It remains unclear whether the Trump administration has formally endorsed the proposed phased structure. Indian Commerce Minister Piyush Goyal is currently in Washington on a four-day visit, where he is expected to meet with US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick to push forward the dialogue.

Neither India’s Commerce and External Affairs ministries nor their US counterparts have commented publicly on the evolving framework. But sources say the second stage of the deal could materialize between September and November, potentially coinciding with Trump’s anticipated visit to India for the Quad leaders’ summit. That phase would expand the scope to cover 19 key areas agreed upon in the bilateral terms of reference outlined in April.

The final and most comprehensive phase of the deal would hinge on approval from the US Congress and could stretch into next year. This full-scale agreement would likely encompass a broader range of economic sectors and regulatory issues, cementing a long-term trade framework between the two democracies.

India’s Coal-Heavy Plans Threaten Global Net-Zero Targets.

India’s aggressive expansion of coal-based steelmaking capacity is putting global decarbonization efforts at risk, according to a new report by Global Energy Monitor (GEM), a non-profit that tracks global energy infrastructure.

India is now the most polluting steel producer globally, despite China’s dominance in total production capacity. What’s more concerning, GEM notes, is that India has the world’s largest steel pipeline under development, over 350 million tons per year, with much of it tied to traditional blast furnaces fueled by coal.

Immediate action needed: The urgency is tied to the International Energy Agency’s goal of making 37 percent of global steel without coal-based feedstock by 2030. Current trends suggest the world is on track to reach about 36 percent by the end of the decade, a figure that could slip if India continues prioritizing coal-based capacity.

Why production is high: India’s reliance on coal for steelmaking stems in part from a lack of scrap metal, which is essential for greener electric arc furnaces (EAFs). While developed nations are transitioning to EAFs and direct reduced iron (DRI) using hydrogen or natural gas, India continues to expand traditional, emissions-heavy production methods to meet domestic demand for construction and infrastructure.

The steel industry is among the top global carbon emitters, responsible for over 10 percent of total global CO₂ emissions, primarily due to its dependence on fossil fuels. With steel demand rising in emerging economies like India, the trajectory of their production models will have an outsized impact on the planet’s climate trajectory.

Despite some efforts to introduce lower-emission technologies, India’s current path could lock in decades of high emissions unless policy shifts or investments in clean technologies accelerate. International observers and climate advocates are increasingly urging India to adopt more ambitious green steel initiatives, including scaling up recycling infrastructure and incentivizing low-carbon alternatives.

Six IndusInd Bank Executives Under SEBI Probe.

India’s market regulator is investigating six senior officials at IndusInd Bank, India’s fifth-largest private lender, over alleged insider trading tied to a major accounting lapse that rocked the lender earlier this year.

SEBI is examining whether these executives offloaded employee stock options while in possession of material nonpublic information (MNPI) about the bank’s internal accounting issues. The trades under scrutiny allegedly occurred before the lender publicly disclosed a $230 million (₹19.7 billion) hole in its balance sheet, stemming from years of misreported internal derivative transactions.

What exactly happened? The case follows a forensic audit conducted by Grant Thornton, which found that two executives at the bank traded in its shares while aware of accounting discrepancies, moves that triggered red flags at SEBI. The regulator has requested a full copy of the audit report from the bank, sources said.

The scandal came to light in March, when IndusInd publicly admitted to incorrect accounting of internal derivative trades, a revelation that stunned investors and sent the stock plummeting. In the fallout, both CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from their posts in April. While the investigation remains in its early stages, SEBI has not yet issued show-cause notices to either the individuals involved or the bank itself, the people said, requesting anonymity due to the confidential nature of the probe.

The short-term fallout: Shares of IndusInd Bank have fallen sharply amid the controversy, and ratings agency CRISIL has since placed the lender’s long-term debt on a “watch negative” status.

Selling shares while in possession of MNPI is a violation under SEBI’s Prohibition of Insider Trading Regulations, which can result in monetary penalties, trading bans, and, in some cases, clawbacks of bonuses and stock options under a company’s internal code of conduct. Although SEBI has initiated several insider trading actions in recent years, criminal convictions remain rare. Most cases conclude with regulatory orders involving fines and temporary bans on market participation.

Adding to the regulatory pressure, IndusInd has been asked to explain why it delayed disclosure of the accounting lapses, despite senior management reportedly being aware of the issue as early as September 2024, according to the same sources. Brokerages including CLSA and Investec have downgraded the stock, citing governance concerns and a lack of clarity on the bank’s internal controls. Analysts say the probe could have far-reaching implications for IndusInd’s leadership, investor confidence, and regulatory compliance.

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Gupshup.

Macro

• Gold prices dipped as safe-haven demand from Moody’s US downgrade faded and market focus shifted to easing trade tensions. Despite the pullback, gold remains up over 20 percent this year amid ongoing global economic uncertainty.

• Bernstein says the anticipated US-India trade deal, while positive for select sectors like pharma and electronics, is unlikely to significantly impact India’s overall economy or equity markets. Meanwhile, strong earnings and easing liquidity are boosting sentiment for shadow lenders, and analysts are turning bullish on India’s music industry as streaming drives monetization.

• A growing boycott in India is targeting Turkish goods, including coffee, chocolates, cosmetics, and clothing, over Turkey’s support for Pakistan in a recent military standoff. About 13 million grocery stores have joined the effort, and Indian e-commerce platforms have removed Turkish brands, citing national interest. The backlash follows Turkish President Erdogan’s public backing of Pakistan during cross-border clashes in Kashmir.

Equities

• Indian benchmark indexes fell slightly after Moody's downgraded the US credit rating, dragging down IT stocks, while mid- and small-cap shares rose on hopes of a domestic interest rate cut. The Nifty 50 and Sensex each closed about 0.3 percent lower.

• Power Grid Corporation of India reported a slight 0.5 percent drop in quarterly profit due to delays in energy transmission projects, despite a 2.5 percent rise in revenue. The company also exited two joint ventures as part of its portfolio reshuffle.

• Redington reported a rise in quarterly profit, boosted by strong demand for cloud services and automation. Revenue jumped nearly 18 percent on growth in South Asia and Africa, and the company also logged a one-time gain from selling its Turkey-based unit, Paynet.

• Burger King's India operator, Restaurant Brands Asia, posted a smaller quarterly loss as its budget-friendly menu attracted more diners amid tight consumer spending. The net loss narrowed to $6.58 million (₹562.8 million) from $9.97 million (₹852.6 million) a year earlier.

Alts

• India's LNG imports are set to increase as power companies ramp up gas-based electricity generation to meet rising demand, according to Petronet LNG. The government plans to boost plant utilization.

• India has invoked emergency measures requiring gas-fired power plants to boost output from May 26 to June 30 to prevent summer blackouts amid record electricity demand. The plants, which typically run at low capacity due to fuel costs, will now operate under government direction with guaranteed offtake and payment security.

Policy

• India's markets regulator has threatened two Mauritius-based funds holding Adani shares with penalties for failing to disclose shareholding details during a probe sparked by Hindenburg's 2023 allegations. The funds are seeking to settle without admitting guilt, according to a document reviewed by Reuters.

• India's central bank has granted Emirates NBD "in-principle" approval to establish a wholly owned local unit by converting its existing branches. This move will give the Dubai-based bank the same regulatory standing as domestic banks.

• India’s RBI has drafted looser rules to let banks and NBFCs invest in alternative investment funds again, rolling back the blanket ban imposed in December  2023. Lenders will now face higher provisioning only when an AIF holds exposure to its own borrowers.

• The US has imposed visa bans on staff and owners of India-based travel agencies accused of facilitating illegal migration. The State Department said the restrictions target individuals who knowingly help migrants enter the US unlawfully. The number and identities of those affected were not disclosed, but the action follows investigations by the US mission in India.

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.