📰Jane Street's Uphill Battle Continues | Daily India Briefing

RBI limits banks’ exposure to alternative investment funds. Major sports retailer, Decathlon, looks to expand in India. Jane Street requests more time to make its case to stay in India.

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Macro

• Indian equities are under pressure as the MSCI India Index trails its emerging market peers by over 20 points, reversing its usual outperformance. Analysts cite expensive valuations, slowing earnings, and lack of exposure to booming tech trends as key drags.

• India's finished steel imports fell nearly 30 percent year-over-year in April–June 2025, driven by sharp declines in shipments from China and Japan. The drop follows a 12 percent safeguard duty imposed in April to curb cheap imports, while South Korea remained the top exporter and Belgium was the leading destination for Indian steel exports.

• The Indian rupee fell to a near four-month low, closing at 86.815 per dollar amid trade uncertainty and persistent foreign outflows. Traders cite weak U.S.-India trade prospects and sustained dollar demand from importers as key pressures.

• India and Taiwan were the top buyers of Russian seaborne naphtha in June, driven by cost advantages and strong domestic demand. India, in particular, shifted some imports from the UAE to Russia to cut costs, receiving 250,000 tons that month.

Equities

• India's National Stock Exchange has offered nearly $161 million (₹14 billion) to settle two long-pending regulatory cases and is awaiting SEBI’s response. Resolving these issues could clear the way for the exchange’s long-delayed IPO, stalled since 2016 due to allegations of unfair trading access.

• An audit by India’s aviation regulator found 51 safety lapses at Air India, including unapproved simulators, pilot training gaps, and crew rostering issues. These findings add pressure on the airline, already under scrutiny after a recent deadly crash.

• Indian electric cab provider BluSmart has entered insolvency after a tribunal admitted a creditor's petition, following allegations that co-founder Anmol Jaggi diverted company funds for personal use. The firm had suspended operations in April amid ongoing regulatory scrutiny.

• Indian solar panel maker Waaree Energies said it is confident in its U.S. export strategy and ready to address a potential anti-dumping probe, denying allegations of undercutting prices. CEO Amit Paithankar stated the company's pricing is transparent and compliant with regulations.

• Deepak Fertilisers reported a 24.4 percent rise in quarterly profit, driven by strong demand for its crop nutrition products. Fertilizers and chemicals accounted for nearly half of total revenue, with both segments posting solid growth.

• Adani Power will consider a stock split proposal at its board meeting on August 1. The move could make shares more affordable to investors and increase liquidity.

• V-Guard Industries missed profit estimates as weak summer weather in South India hurt demand for cooling products, leading to a 16 percent drop in consumer durables sales. Revenue and profit both declined year-over-year, and the company plans to enter the lighting business.

• Arvind reported a 35 percent jump in quarterly profit as global brands like Gap and H&M increasingly shift sourcing from China to India. Revenue rose 10 percent on strong textile demand, though margins remain pressured by U.S. tariffs and higher input costs.

Alts

• Shapoorji Pallonji Group secured a key RBI waiver, avoiding higher interest costs and potential default on its $3.4 billion private debt deal. The extension gives its finance unit more time to meet capital norms without injecting $690 million (₹60 billion) in fresh capital.

• India's GMR Energy is in talks to raise $184 million (₹16 billion) via five-year bonds, offering an internal rate of return of 14.60 percent. The funds will support inter-group lending and loan repayments, with redemptions staggered over the final three years.

Policy

• U.S. Trade Representative Jamieson Greer said more talks are needed with India to reach a trade deal before the Aug. 1 tariff deadline, as key issues remain unresolved. He noted India’s traditionally protectionist stance poses a challenge, dampening hopes for a near-term agreement.

• India's Defence Minister Rajnath Singh denied U.S. President Trump's claim of brokering a ceasefire with Pakistan, stating that the May conflict ended only after India achieved its military objectives. He emphasized there was no external pressure or trade-related influence behind the decision to halt fighting.

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1. RBI Limits Banks’ Exposure to AIFs

The RBI has moved to cap banks’ exposure to Alternative Investment Funds (AIFs), setting a collective limit of 20 percent of a fund’s corpus, effective January 1, 2026. Individual banks will be restricted to a maximum of 10 percent per fund. The decision finalizes draft guidelines issued in May, which had proposed a more conservative 15 percent ceiling.

AIFs, private pooled vehicles that invest across public markets, startups, real estate, and credit, have grown rapidly in recent years, often drawing capital from large institutions, including banks. However, the RBI has grown increasingly concerned about indirect exposure risks and regulatory arbitrage.

Critically, the central bank has mandated that banks must make 100 percent provisioning on any AIF investments that have downstream exposure to their own borrowers. This builds on earlier rules from December 2023 that barred such overlaps altogether and the subsequent March 2024 revision that softened the ban but introduced stricter capital buffers.

The move aligns with broader regulatory efforts to limit so-called "evergreening" of loans—where troubled assets are masked through indirect investment routes. It also reflects heightened caution around rising AIF participation in non-transparent credit and equity deals.

While the final cap of 20 percent is less stringent than initially proposed, the RBI’s action signals a clear tightening stance on how banks allocate capital into alternative structures amid India’s rapidly evolving financial landscape.

2. Major Sports Retailer Expands in India

French sporting goods giant Decathlon has announced plans to double its sourcing from India to $3 billion (₹260.9 billion) by 2030, making the country a cornerstone of its global supply chain strategy. The move reflects a broader shift in multinational manufacturing as companies recalibrate sourcing away from China amid rising costs, geopolitical tensions, and supply chain diversification imperatives.

India currently accounts for about 7–8 percent of Decathlon’s global sourcing, and that figure is set to rise to 15 percent over the next five years. This expansion will be driven by high-margin, high-demand segments such as footwear, fitness gear, and technical textiles, areas in which India has been steadily building manufacturing scale and quality.

Decathlon's pivot underscores a growing macroeconomic trend: global brands are increasingly leveraging India not just as a consumer market, but as a competitive production hub for both domestic and export demand. The retailer’s commitment to generating over 300,000 direct and indirect jobs highlights the spillover effect on India’s labor markets, industrial ecosystems, and regional economies.

This development comes as India aggressively promotes its “Make in India” and PLI (Production-Linked Incentive) schemes to boost manufacturing in textiles, footwear, and electronics. As Western firms seek cost-efficient alternatives in a more fragmented world trade order, India’s demographic dividend, improving logistics, and policy tailwinds are making it an increasingly attractive supply chain node in the global economy.

3. Jane Street’s Uphill Battle Continues

Jane Street has requested more time from regulators to make its case as to why it should be allowed to remain in India. The quant trader’s legal battle with SEBI is shaping up around a central question: Did its aggressive trading strategies exploit, or merely respond to, India’s booming retail options demand?

SEBI alleges the U.S.-based firm manipulated the Bank Nifty index by buying up stocks in the cash and futures markets while simultaneously building large short positions in options, particularly on January 17, 2024, its most profitable day in India. But Jane Street is pushing back, expected to argue that its activity was driven by surging retail demand for weekly index options, especially puts.

Retail investors have flooded Indian derivatives markets in recent years, with Bank Nifty and Nifty weekly expiries seeing explosive growth. The sheer scale of speculative flows, often from individuals with limited hedging, has forced market makers to adjust positions dynamically. Jane Street claims its trades were a function of this activity, not an attempt to distort prices.

Sources say the firm deliberately spread out its hedging over several hours to avoid excessive market disruption, not to conceal intent. SEBI, however, sees the strategy as deliberate index propping that misled retail players and triggered losses.

With a $567 million (₹48.4 billion) deposit in escrow and a request for more time to formally respond, Jane Street is betting that a nuanced explanation of India’s retail options boom may help soften SEBI’s stance.

See you tomorrow.

Written by Eshaan Chanda & Yash Tibrewal. Edited by Shreyas Sinha.

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