📰Lutnick Signals Imminent US-India Trade Deal, RBI to Cut Rates, Adani Expands in Airports

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:

• U.S. Commerce Secretary Lutnick says US-India trade deal is imminent,

• Reserve Bank of India is expected to cut rates by 25 bps,

• Adani Group is weighing an entry into India’s airport ground handling business.

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

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—Shreyas, [email protected]

Market Update.

Lutnick Signals Imminent US-India Trade Deal.

Commerce Secretary Howard Lutnick has expressed strong optimism over the prospects of a trade agreement between the United States and India, suggesting that a deal could be finalized in the “not-too-distant future.” Speaking at the US-India Strategic Partnership Forum in Washington on Monday, Lutnick hinted at meaningful progress in bilateral trade negotiations.

Tariff clock ticking: India is among the first countries actively working to finalize a trade agreement with the US, as it aims to sidestep Trump’s reciprocal tariffs set to kick in on July 9. A delegation of US officials is scheduled to travel to New Delhi on June 5-6 to advance the negotiations, which are expected to unfold in three phases.

According to Lutnick, India may gain more favorable terms by securing an early agreement. “Earlier countries get a better deal, that’s the way it is,” he noted. “So those who come in July 4th to July 9th, there’s just going to be a pile,” he added, implying India is working hard to close the pact before the rush.

A three-part trade deal: The potential deal is being structured in three tranches. The initial phase may address market access for industrial goods, select agricultural products, and the easing of non-tariff barriers. New Delhi has reportedly taken a firmer stance in these talks, demanding the removal of the 10 percent baseline tariff and urging the US to ease conditions for rules of origin.

The Trump-Modi dynamic: The commerce secretary credited the strong personal relationship between Trump and Modi as a key factor in the momentum of trade talks, describing it as an easy path. In recent months, Modi’s government has sought to mollify US concerns by reducing tariffs on certain goods and pledging greater imports of American oil, gas, and defense equipment to address the persistent trade imbalance.

Trade target: The US and India have set an ambitious goal of increasing bilateral trade to $500 billion (₹42.85 trillion) by 2030, up from $127 billion (₹10.88 trillion) in 2023. A successful trade deal would represent a significant milestone toward achieving that target, while also reinforcing economic ties between the world’s largest and fastest-growing democracies.

However, challenges remain. India’s long-standing preference for Russian military equipment and its complex regulatory environment have often been friction points in past talks. Lutnick acknowledged these hurdles but noted that the Indian government is working on them.

RBI Poised to Cut Rates by 25 bps, Fund Managers Predict.

India’s central bank is expected to cut its benchmark interest rate by 25 basis points to 5.75 percent this Friday, in a move aimed at sustaining the country’s economic momentum amid cooling inflation and global uncertainties, as per forecasts from India’s top fund managers who collectively manage over $70 billion (₹6 trillion) in assets.

Axis Asset Management forecasts the Reserve Bank of India (RBI) will end its current easing cycle with the repo rate at 5.5 percent, while Kotak Mahindra Asset Management sees potential for a deeper cut to 5 percent. The repo rate currently stands at 6 percent, following a series of reductions from its recent peak of 6.5 percent.

Bond markets have already responded to expectations of looser monetary policy. “A large part of the bond rally has happened,” said Devang Shah, head of fixed income at Axis Asset, who manages over $14 billion (₹1.2 trillion). He added that investors should now expect more moderate debt returns of 8-9 percent this year, compared to 12 percent in 2024.

The RBI’s policy space has widened as headline inflation eased to 3.16 percent, comfortably below the central bank’s 4 percent medium-term target. In addition, the banking system is flush with liquidity, with excess funds estimated at $33.9 billion (₹2.9 trillion), the highest level since November. This surplus has been bolstered by the RBI’s liquidity infusions and its record dividend payout to the central government.

Macroeconomic tailwinds: The abundant liquidity has driven yields on short-term instruments such as treasury bills and corporate bonds to multi-year lows. At the same time, it has provided a strong tailwind for Indian equities, which have rebounded sharply from the April lows triggered by global trade tensions.

Foreign institutional investors have poured nearly $3 billion (₹257 billion) into Indian stocks so far this quarter, drawn by improving corporate earnings and India’s relative insulation from global macro shocks. As a result, the benchmark Nifty 50 index now trades within 6 percent of its all-time high reached in September 2024.

Proceeding with caution: Despite the bullish sentiment, some asset managers caution against complacency. “The biggest worry is investors have got used to 20% returns,” Nilesh Shah, CEO of Kotak Mahindra Asset, told Bloomberg. He noted that while the outlook remains favorable, return expectations should be more grounded going forward. Still, he emphasized India’s long-term value, calling it the “cheapest emerging market” from a five-year investment perspective.

The RBI’s monetary policy committee concludes its three-day meeting on June 6. A rate cut, if delivered, will mark the third consecutive reduction and affirm the central bank’s commitment to supporting domestic demand while managing external risks.

Adani Eyes Airport Ground Services as Celebi Exits India.

Adani Group is weighing an entry into India’s airport ground handling business, stepping in to fill a critical service gap left by Turkish firm Celebi’s abrupt exit amid geopolitical tensions. Adani Airport Holdings, which already operates eight airports across India, including in Mumbai and Ahmedabad, is evaluating bids for providing ground services at the two facilities, CEO Arun Bansal confirmed during an aviation industry event in New Delhi.

The move reflects the conglomerate’s broader strategy of expanding into adjacent sectors that complement its core infrastructure, energy, and transport operations. If successful, Adani would become the third ground handler at these airports, aligning with regulatory mandates requiring a minimum of three service providers at high-traffic locations.

Geopolitics triggers opportunity: Celebi’s departure last month followed the Indian government’s revocation of its security clearance, reportedly on national security grounds, after Turkey publicly backed Pakistan during recent military tensions. The Turkish firm had been a key player in India’s ground handling ecosystem, operating at nine airports including New Delhi and Mumbai.

A strategic fit: The foray into ground services dovetails with India’s long-term aviation ambitions. The country currently has over 140 operational airports and aims to grow that number to 350 by 2047, backed by heavy public and private investment in aviation infrastructure.

Adani, through its flagship Adani Enterprises, is already heavily invested in India's airport and logistics sectors. It controls the country's second-busiest airport in Mumbai and is developing a new facility in Navi Mumbai, positioning itself to benefit from the expected surge in air traffic and related services.

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Gupshup.

Macro

• Investors are betting the RBI will cut rates by 25 basis points this week. Headline inflation is now at 3.16 percent, with the medium-term target at 4 percent. Excess cash has risen to $33.9 billion (₹2.9 trillion), which is also the highest since last November. Money managers expect rates to end 2025 at anywhere from 5-5.5 percent. 

• Palm oil prices rose 2.6 percent after India cut duties to 10 percent. This is the opposite reaction India wanted, since the government needs to reduce cooking oil prices for the largest importer of cooking oil globally.  

• Record heat waves could affect crops and electricity grids.The respite for India has been the strong monsoon season. Strong rains and wind in northern India have bolstered crop growth this year, something that could help abate inflation.  

Equities

• New block trades have pushed daily equity turnover to $14 billion (₹1.2 trillion), the highest since November. Large investor turnover and secondary offerings have resulted in increased volume. Some investors believe that the interest in Indian equities could lead to an increase in IPOs and QIPs for the rest of 2025.

• Adani stocks fell on reports that the US is probing deals that Adani did with Iran. Iran is chock-full of sanctions, which likely prompted the investigation, wholly unrelated to the US bribery case. The WSJ found that there are LNG routes from Adani’s Mundra port and the Persian Gulf, which could lead to the accusations. 

• The Nifty PSU Bank Index rallied 5.1 percent this week due to public banks navigating margin declines better. The government is likely to seek out higher dividend payouts from state-run companies, which implies that those companies are performing well. 

• Brookfield-backed Leela Hotels started its IPO roughly. Leela’s shares traded sideways after the debut due to limited interest from retail and high net worth individuals. Institutional buyers were more excited about the listing, but there are concerns about the debt burden and high valuation given that Leela only has 5 Indian properties right now.

Alts

• JSW Neo Energy is looking for $675 million (₹57.7 billion) to back its acquisition of O2. O2 is a renewable energy firm with a capacity of 4.7 gigawatts. JSW is seeking to reach 20 gigawatts of renewable energy production by 2030, thus, O2 bolsters their immediate goal. The funding is going to be in a 5-year, floating-rate note (170 basis points above SOFR), which is being syndicated by MUFG and Deutsche Bank.

• India's new EV manufacturing policy is unlikely to attract many participants. There are lowered import duties for 8,000 vehicles annually, but stringent manufacturing requirements. Automakers have to invest $500 million (₹41.5 billion) in 3 years and a minimum revenue of $586 million (₹50 billion) from the local plant in the 4th year after investing.

• Gail India is trying to sell its extra LNG intake. The high inventories and waning demand in India have caused water-stored LNG to enter the market. The firm only has until July 12th, when the vessel has to return to the US for restocking.  

Policy

• India and the Moscow-backed Eurasian Economic Zone are starting trade talks. That Russian zone includes Russia, Belarus, Kazakhstan, Kyrgyzstan, and Armenia. A potential deal would give Eurasia access to a resource-rich nation while India could get cheaper electronics. The talks come at the same time as India-US and India-EU, which could complicate all 3 discussions. 

• The government is seeking larger dividends from state-run firms, by as much as 25 percent. Officials managing these companies are also requesting that these dividends go from annual to quarterly, with a total request of $10.5 billion (₹900 billion). These, plus the RBI payout, reduce the budget deficit, especially after the middle class saw sweeping income tax reductions.

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.