📰Silver Market Fully Collapses | Daily India Briefing

Happy Diwali! Today’s deep dives: Foreign deals for banks are continuing to rise. India’s festive-season buying spree has triggered a global silver crunch. India said it’s making steady progress toward a trade agreement with the US.

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Macro

• Former RBI Governor Rajan sees risks to central banks cutting rates amid rising asset prices. Gold, an inflationary indicator, along with other risky assets has risen in value dramatically yet central banks continue to cut. Rajan sees this as fueling an asset value bubble since rate cuts continue to prop up asset prices artificially. 

• India is pushing rupee settlement with the UAE, Indonesia, and neighbors like Mauritius.This adds to the existing links with the US, Japan, EU, and Britain. The goal is to make the rupee an internationally relevant currency which would make India more developed faster. Greater local currency use also lowers costs for consumers and companies.

Equities

• Unilever praises the GST cut with demand being boosted. The company expects that quarterly earnings will show relatively flat growth due to supply chain disruptions in the summer ahead of festive shopping, though the tax cut is boosting demand in the next 2-3 quarters.

• Private lenders like HDFC and ICICI are showing thinner margins due to rate and GST cuts. The fiscal and monetary interventions have led to lending costs going down while saving rates have stayed mostly flat. IndusInd also reported a surprise loss due to an ongoing cleanup of its micro-finance portfolio. 

• Reliance is regaining momentum after retail has turned around after 18 months of slowdowns. Reliance Retail is the largest share of the company and fiscal changes have led to revenue expected to rise. On the other hand, the telecom unit Jio’s revenue per user has continued to drop due to pricing wars with competitors.

• Quick commerce companies like Eternal are seeing worse margins.Revenue has tripled y-o-y but profits came in below estimates with the company’s shares falling. Investors could still focus on market share expansion, even if margins stay weaker.

Alts

• Emissions are expected to peak in 2045 in India under current climate targets. Climate change is expected to worsen due to increased building and cars on roads, though cleaner energy sources will eventually mitigate the increased use. Energy supply is expected to go from 870 million tons of oil equivalents to 2,250 million tons by 2070. 

• Emirates NBD is investing $3 billion (₹266.4 billion) in a landmark financial deal.The target, RBL Bank, is divesting 60 percent of holdings and there could be an open sale for another 26 percent of the company. Geopolitical and tariff-related supply chain risks globally has made investors look for alpha in non-exposed sectors.

Policy

• Modi attacked the opposition party for increasing 'Maoist' terrorism in the country. He was calling out party members for carrying constitutions and inciting socialists attacking others. In particular, he said that the Congress Party led to thousands of deaths since he came into power in 2014.

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1. Foreign Deals for Banks Continue to Rise

A spate of billion-dollar deals for Indian banks has thrust the country’s financial sector into the global spotlight, at a time when US credit losses and trade tensions have rattled investors worldwide. Over the weekend, Emirates NBD Bank PJSC plans to invest $3 billion (₹266.4 billion) in RBL Bank, marking the largest-ever foreign investment in India’s banking industry. Earlier this month, Abu Dhabi’s International Holding PJSC agreed to buy into Sammaan Capital for about $1 billion (₹88.8 billion), while Japan’s SMBC in May paid $1.6 billion (₹142.1 billion) for a 20 percent stake in Yes Bank Ltd.

Altogether, about $15 billion (₹1.3 trillion) of deals involving Indian financial institutions have been announced so far this year. The surge underscores how global investors are seeking exposure to one of the world’s fastest-growing major economies, building on a multi-year trend of capital flowing into banks, insurers, and fintech companies.

The contrast with developments elsewhere is stark. In the US, recent collapses of Tricolor Holdings and First Brands Group have reignited concerns over hidden credit losses, while trade tensions continue to weigh on risk sentiment. India, by comparison, has benefited from policy reforms, digital adoption, and a large underbanked population that is driving demand for credit.

Still, foreign entrants have historically struggled to make lasting inroads in India’s competitive banking market, which remains dominated by entrenched domestic players. RBL Bank CEO Subramaniakumar said the renewed investor appetite reflects confidence in India’s economic fundamentals. A series of solid quarterly results have supported sentiment. The Nifty Financial Services Index hit an intraday record on Monday, while shares of RBL Bank rose as much as 8.4 percent to the highest since February 2020. The Nifty Bank Index has gained over 13 percent this year, buoyed by robust loan growth at major lenders including HDFC Bank and ICICI Bank.

The RBI has reinforced the sector’s resilience by tightening oversight and discouraging excessive risk-taking, particularly among shadow lenders. Those moves followed a wave of bad loans that hit the system about seven years ago, prompting the government to recapitalize state-run banks and overhaul bankruptcy laws.

Policymakers are now exploring new ways to attract foreign capital, including easing limits on overseas ownership of state-run lenders and potentially allowing large corporations to apply for banking licenses. A planned government stake sale in IDBI Bank could fetch billions, while Mitsubishi is reportedly in talks to acquire a stake in Shriram Finance.

2. The Silver Market Fully Collapsed

India’s festive-season buying spree has triggered a global silver crunch, sending prices to record highs and roiling one of the world’s most liquid commodity markets. Vipin Raina, head of trading at MMTC-Pamp (the largest in India), said his refinery ran out of silver stock for the first time ever last week. 

The surge began in early October as Indian households rushed to buy silver jewelry and coins ahead of Diwali, fueled by social media hype predicting a silver rally after gold’s record climb. Premiums in India jumped from a few cents to over $5 an ounce as dealers and refineries ran dry, while bullion imports from China stalled during a week-long holiday.

With domestic supplies exhausted, demand spilled over to London where traders found vaults nearly empty. The shortage pushed borrowing costs in London to as high as 200 percent and drove benchmark prices above $54 (₹4,800) an ounce, the highest ever, before a sharp 6.7 percent correction.

Analysts say a perfect storm has drained global inventories. Years of surging demand from the solar industry, large ETF inflows amid dollar-debasement fears, and traders front-running possible US tariffs have depleted London’s free float of metal to less than 150 million ounces.

Major banks like JPM reportedly told clients they could not supply silver to India until November, further deepening the crunch. Several Indian fund houses, including Kotak and UTI, temporarily suspended new subscriptions to their silver ETFs as they struggled to secure physical metal. The chaos revived memories of past market squeezes, from the Hunt brothers’ failed corner in 1980 to Warren Buffett’s 1998 buying spree. But this time, the London Bullion Market Association sees the squeeze as the result of genuine scarcity rather than speculation, with mine supply lagging demand for five consecutive years.

Prices retreated late last week as shipments from New York began arriving in London and traders unwound bullish bets. Still, analysts warn that silver’s volatility may persist, with the market remaining acutely sensitive to Indian festival demand, US tariff risks, and ongoing shifts in global precious metal flows.

3. The US Signals More Progress on an Indian FTA

India said it’s making steady progress toward a trade agreement with the US, as both nations look to ease tensions that have flared in recent years over tariffs and energy purchases from Russia. Officials from both sides have narrowed their differences on several trade-related issues, an Indian government representative said in New Delhi on Saturday, asking not to be identified as the discussions are private. 

The talks mark a shift in tone after a period of friction under Trump, who imposed 50 percent tariffs on Indian goods and criticized New Delhi’s purchases of discounted Russian oil. In recent weeks, however, Trump has softened his rhetoric and spoken twice with Modi, signaling that both sides are keen to reset the relationship. Trump said last week that India would gradually stop buying oil from Russia, a statement that Modi’s government has not directly denied. 

Instead, New Delhi said energy decisions would be made “in the interest of Indian consumers,” while state refiners indicated they expect to scale back Russian imports. Officials have also emphasized India’s capacity to buy more crude from the US if pricing and logistics remain favorable.

India became one of the biggest buyers of Russian crude after Moscow’s invasion of Ukraine in 2022, taking advantage of steep discounts to secure supplies and contain domestic fuel inflation. Russian oil now accounts for about a third of India’s total crude imports, despite repeated US efforts to curb the flow of Russian energy into global markets.

See you tomorrow.

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

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