📰JPMorgan Cuts India Exposure | Daily India Briefing

JPMorgan cuts its India exposure. India’s retail inflation rose modestly in August. Ukraine will impose restrictions on imports of Indian diesel fuel.

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Macro

• JPMorgan will cut the weight of top issuers like China and India in its flagship EM bond index by lowering the issuer cap from 10 percent to 9 percent starting 2026. The move shifts flows toward smaller markets, benefiting Thailand, Poland, South Africa, and Brazil.

• India’s exports rose 6.7 percent in August despite steep new US tariffs, as businesses rushed to front-load shipments. Imports fell 10.1 percent, narrowing the trade deficit to $26.5 billion (₹1.3 trillion), while New Delhi seeks new markets and advances EU free trade talks.

• India’s palm oil imports surged 15.8 percent in August to a one-year high of 990,528 tons, driven by festive demand and cheaper prices versus soyoil. Soyoil imports dropped 25.3 percent, while sunflower oil imports rose 28.5 percent, trade data showed.

• India unveiled its first national geothermal energy policy to spur clean energy growth, offering tax breaks, duty exemptions, and funding support. The plan targets 381 hot springs and 10 provinces, promoting repurposed oil wells, heat pumps, and joint ventures with energy firms.

Equities

• India’s stock market got a boost as the regulator eased IPO and foreign investor rules to attract more capital flows. Key changes include smaller required public stakes, extended compliance timelines, wider anchor investor limits, and streamlined entry for global funds.

Alts

• Mukesh Ambani’s Reliance Group raised $2.4 billion (₹210 billion) via asset-backed securities, one of India’s largest such deals this year. The issuance, carrying a 7.75 percent coupon, drew strong demand from major asset managers and boosts India’s growing securitization market.

• UCO Bank has secured government approval to handle trade payments for Nayara Energy, the Rosneft-backed refiner recently sanctioned by the EU. Details such as currency choice are still being finalized, as larger banks avoid exposure to Western penalties.

• CVC Capital Partners is in early talks to buy KKR’s 63 percent stake in Mumbai-based Avendus Capital after Mizuho’s bid stalled over valuation. A deal would mark a major PE exit and highlight investor appetite for India’s financial services sector.

Policy

• The EU is weighing new sanctions on Indian and Chinese firms enabling Russia’s oil trade, as Washington pushes tariffs of up to 100 percent and wider energy restrictions. Internal resistance from Hungary and Slovakia complicates Brussels’ alignment with Trump’s tougher stance.

• US officials will arrive in New Delhi on Monday to resume trade talks with India, weeks after President Trump doubled tariffs on the country to 50 percent. Both sides expressed optimism, though sticking points include Russian oil imports and agricultural market access.

• A Supreme Court-appointed panel has confirmed legal compliance at Anant Ambani’s Vantara wildlife rescue project after probing allegations of animal mistreatment and financial irregularities. The court will issue a detailed order with recommendations for both the center and authorities soon.

• India’s Supreme Court has temporarily suspended key provisions of the amended Waqf law governing Muslim charitable properties. The pause applies to rules on property validity and board composition, amid challenges that the changes infringe on community rights and autonomy.

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1. JPMorgan Cuts India Exposure

JPMorgan Chase & Co. is planning to reduce the weight of its largest issuers, India and China, in its flagship GBI-EM Global Diversified index. Under the proposals, the maximum allowed cap for any single country would fall from 10 percent to 8.5 percent. This change would shrink India’s and China’s share in the index accordingly, opening space for smaller or higher-yielding emerging markets such as Brazil, South Africa, Poland, and Colombia to gain more weight.

The move to reduce concentration in single countries reflects JPMorgan’s view that geopolitical risk is rapidly rising, and emerging market economies will experience more volatility; the firm is still soliciting comments from major clients before finalizing the decision.

The move to reduce India exposure breaks from JPMorgan’s long-term view on India. JPMorgan’s Singapore-based Co-Head of Global Corporate Banking, Oliver Brinkmann, told Bloomberg on Sept 2, “The geopolitical environment, including tariffs, is complicated but JPMorgan takes a long-term strategic view of its business in India,” confirming that the bank plans to expand its banking services in the country to take advantage of growing revenues in the corporate sector. Indian companies are expected to double their capex to $850 billion over the next five years, according to a S&P Global Ratings report.

2. India’s Inflation Rises Slightly, Keeping Door Open for Rate Cuts

India’s retail inflation rose modestly in August, but remained firmly within the central bank’s tolerance band, leaving policymakers room to consider interest rate cuts later this year as growth pressures mount.

Consumer prices climbed 2.07 percent year-on-year, up from July’s revised 1.61 percent, official data showed Friday. The figure aligned with a Reuters poll estimate of 2.1 percent and stayed well inside the Reserve Bank of India’s 2–6 percent target range. The RBI’s rate-setting panel is due to meet on October 1.

Economists say with inflation subdued and the Fed easing expected, the RBI could cut its 5.5 percent repo rate by 25–50 basis points from December if risks to growth worsen. “We see scope for easing opening up from December policy if downside risks materialise,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank.

Food prices rose on a month-to-month basis, led by vegetables, meats, and oils, though annual vegetable inflation remained deeply negative at –15.9 percent. Core inflation, excluding food and energy, was steady at around 4.1 percent. Above-normal rainfall has raised concerns that rice, soybean, and pulse crops could face damage, potentially lifting prices in the coming months.

Meanwhile, New Delhi’s recent tax cuts on food and household goods are expected to ease cost pressures. “Even a partial pass-through of GST cuts could lower FY26 inflation by 20–30 basis points,” said Sakshi Gupta, economist at HDFC Bank.

Tariffs on Indian exports to the U.S., however, may weigh on corporate margins and job growth, limiting firms’ pricing power. Analysts expect inflation to stay low into 2026, giving policymakers greater leeway to support growth.

3. Ukraine to Restrict Imports of Indian Diesel

Ukraine will impose restrictions on imports of diesel fuel from India beginning October 1, amid concerns that supplies may contain Russian crude, according to energy consultancy Enkorr. Ukraine imported about 119,000 tons of Indian diesel in August, making up 18 percent of total diesel imports, Enkorr reported.

India has become a major global diesel supplier by refining cheap Russian oil and exporting to markets worldwide. Ukrainian security agencies have now ordered that all consignments of Indian diesel undergo laboratory analysis to verify whether Russian-origin components are present, Enkorr said Monday.

Prior to Russia’s full-scale invasion in 2022, Kyiv depended on Belarus and Russia for most of its diesel needs. Since then, imports have largely shifted to European suppliers, but this year, overall volumes fell 13 percent year-on-year to 2.74 million tons. Analysts say the restrictions on Indian fuel could add to Ukraine’s procurement challenges just as demand rises ahead of the winter heating season.

See you tomorrow.

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

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