📰Another Economic Indicator Slows Down

Good morning, 

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

• BlackRock expands its India operations,

• Liquidity crunch in the banking system lessens significantly,

• and, Another major indicator reveals India’s economy is slowing down fast.

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

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—Shreyas, [email protected]

Market Update.

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Attend our upcoming “Future of India” expert panel and networking event on Wednesday, February 12, 2025, in New York City.

Our keynote speaker is Dr. Viral Acharya, who served as the deputy governor of the Reserve Bank of India, during which he oversaw India’s monetary policy, financial markets, and the central bank’s research. Buy tickets here.

BlackRock Expands in India.

BlackRock is expanding its India operations with 1,200 new hires, emphasizing AI capabilities. This move not only reinforces India's growing role in global financial services but also shifts the country beyond traditional back-office work into higher-value functions. With this expansion, BlackRock's India workforce will reach 4,700 employees, with most front-office staff based in Delhi and Mumbai. The new AI-focused hires will integrate with a 500-person team in Bangalore, working in partnership with Preqin. Additionally, BlackRock has invested in a $45.9 million (₹4 billion) office lease in Mumbai to support its physical expansion.

A broader industry shift: BlackRock is scaling its Global Capability Centers (GCCs) to help drive India’s evolution from a back-office hub to a key player in investment research, AI-driven analytics, and risk management. The firm sees India’s GCC market reaching $110 billion (₹9.6 trillion) by 2030. Other financial giants—including Goldman Sachs, JPMorgan, HSBC, and Apollo—are also expanding in India, drawn by the country’s increasing financial opportunities across asset classes.

The new hires will focus on machine learning and big data applications in asset management — technologies so profitable in India that even retail traders have begun adopting them. Mirroring its European strategy, BlackRock has also established hubs near IITs, tapping into a talent pool already immersed in proprietary technologies.

Banking Liquidity Crunch Lessens Significantly.

The RBI’s aggressive liquidity measures to address India’s banking system cash crunch have yielded positive results. The liquidity strain, which began in late 2024, was driven by a surge in government spending in early January, large tax outflows, increased cash withdrawals, and RBI dollar sales.

The Solution: Through $7 billion (₹609 billion) in open-market bond purchases, the RBI has eased liquidity pressures without over-relying on repo facilities or hiking rates. Instead, rates have edged lower. As a result, the liquidity deficit—measured by net borrowing from the RBI—has dropped from $25.3 billion (₹2.2 trillion) just a week ago to $7.6 billion (₹660.4 billion).

Improved Business Conditions: The weighted average call rate (India’s equivalent of the U.S. SOFR for overnight borrowing) has fallen to around 6.50 percent, signaling improved liquidity and more funds available for lending. Market rates have also declined, with one-year local swaps easing to 6.24 percent, reflecting expectations for lower rates in early 2026.

Although the RBI cut the cash reserve ratio (CRR) by 50 basis points to 4 percent, the cash crunch persisted due to deteriorating loan portfolios, which absorbed much of the freed-up liquidity. However, lower short-term rates should reduce borrowing costs for interbank loans, businesses, and consumers. With rising expectations of an RBI rate cut and increased liquidity, banks may finally recover losses from underwater loans, while small and medium-sized enterprises stand to benefit. Highly leveraged sectors like infrastructure, telecom, and power utilities should also find refinancing easier after three years of tight liquidity.

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Another Economic Indicator Slows Down.

India’s Services Purchasing Managers’ Index fell to 56.5 in January from 59.3 in December, the slowest in over two years, a result of a deceleration in hiring. (Anything above 50 is still considered expansionary). This is a major threat to the economy: services account for 50 percent of India’s GDP.

The slowdown started due to weak domestic demand, while future expected demand has also dipped to a three-month low. Additionally, inflationary pressures have picked up due to input costs and prices still rising. Interestingly, export businesses have led to manufacturing PMI rising in the same period. 

The silver lining is that hiring has hit a larger growth, one of the highest since the PMI indicators started back in 2005 (official numbers still are not available). The positive signals from this are growth in labor force participation — India has one of the lowest out of many EMs in the region — and increased pressure on wages which the government yearns to grow.

Gupshup.

Macro

• India may continue to cut import taxes and phase out import levies as manufacturing picks up speed. India’s previous lowering of rates on 8,500+ industrial goods has created a manufacturing spark that they hope to continue with more cuts. 

• Indian consumption-focused mutual funds surge after a $12 billion (Rs.1.05 trillion) government budget boost. Firms like Edelweiss and ITI are launching new funds to capitalize on this rising demand.

• Exit polls suggest Narendra Modi’s BJP may regain control of Delhi after nearly three decades. If confirmed, this would mark a major setback for the incumbent AAP and reinforce BJP’s recent electoral momentum.

• Indian indexes closed lower on Thursday ahead of the RBI's rate decision. Sentiment remains neutral ahead of the RBI's widely expected first interest rate cut in nearly five years.

Equities

• India’s No.2 wireless carrier, Bharti Airtel, posted a 506 percent jump in net income to $1.7 billion (₹147.8 billion) for the quarter. Earnings were boosted mostly by one-time gains and the higher user fees Airtel imposed in July.

• State Bank of India’s third-quarter profit surged 84 percent to $1.9 billion (₹168.9 billion). This growth is driven by strong loan growth to small and medium-sized businesses with loan-loss provisions dropping 36 percent.

• Hexaware Technologies, owned by Carlyle Group, will launch a $1 billion (₹87.6 billion) IPO next week. This news comes one week after Hexaware reduced its price target from $1.2 billion (₹105.1 billion), and also marks India’s first billion-dollar IPO of 2025.

• Open AI's Sam Altman touts India as the company's most important market after seeing a tripling of users last year. Altman also engaged with entrepreneurs and officials emphasizing AI’s growing role while addressing competition from DeepSeek.

• Indian food delivery company "Zomato" rebrands as "Eternal" and unveils a new logo. Eternal would comprise its four major businesses - food delivery vertical Zomato, quick-commerce unit Blinkit, live events business District, and kitchen supplies unit Hyperpure.

• India's ITC, and biscuit maker Britannia beat profit estimates due to price hikes. Income support schemes by several states have encouraged people in rural India to spend more on food enabling ITC’s rural demand boom.

• India's Hero MotoCorp beats profit expectations fueled by increase in mid-level model sales. The company's profit increased 12 percent to $137.4 million (₹12.03 billion), topping analysts average estimate of $130 million (₹11.25 billion).

Alts

• India’s NCDEX plans to launch weather derivatives to hedge rainfall risks due to unpredictable rainfall. The product, developed with IIT Bombay and the India Meteorological Department, comes amid rising climate-related challenges for agriculture.

• Tata is expanding its renewable energy portfolio through worldwide investment in hydroelectric projects. Tata aims for over 50 percent clean energy in 14 months and has begun work on multiple projects, including a 1 GW hydro plant in India and a 600 MW project in Bhutan.

Policy

• Analysts anticipate new RBI governor, Sanjay Malhotra, to announce a 25-50 bps rate cut tomorrow. The RBI is also expected to shift focus to economic growth and adopt a more flexible stance on the rupee.

See you Friday.

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.