📰UK-India Trade Deal, Options Are Back, Reliance Disrupts Duopoly

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:

• The United Kingdom and India confirm a landmark trade agreement,

• Options trading rebounds to new highs,

• and Reliance has successfully disrupted an untouchable duopoly.

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

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—Shreyas, [email protected]

Market Update.

A Landmark India-UK Trade Deal is Approved.

The UK–India trade agreement marks a strategic pivot for both nations. By cutting tariffs on nearly 90 percent of British exports and about 99 percent of Indian exports, the pact promises to reshape two of the world’s largest economies, worth $55.4 billion (₹4.7 trillion) in bilateral trade last year, by driving long-term growth of $6.4 billion (₹539.5 billion) annually for the UK (0.17 percent of GDP) and an estimated $34.2 billion (₹2.9 trillion) uplift in two-way trade. Crucially, this deal moves beyond traditional goods, encompassing services market access for India’s IT sector and a bespoke recourse mechanism to shield exporters from Europe’s carbon-adjustment rules, signaling a more modern, multi-sector approach.

Phase down: The agreement’s tariff phase-down schedules reveal ambition and compromise. British whisky and gin have tariffs halved immediately and cut to 40 percent by year 10, while automakers face a gradual reduction from 100 percent to 10 percent under a quota over a decade. These concessions strike at the heart of long-running disputes over alcohol and premium cars, yet still protect nascent UK suppliers through transitional measures. For India, the near-complete liberalization of its exports to Britain spanning textiles, footwear, electronics, and pharmaceuticals underscores New Delhi’s desire to diversify away from China and U.S.-centric supply chains.

India’s win on services is particularly noteworthy: securing obligations on IT, finance, and professional services in a Western market traditionally guarded against foreign competition speaks to the sector’s critical role in India’s export strategy. Likewise, the carbon-adjustment safeguard allows India to challenge limited market access under Europe’s border-adjustment levies, setting a precedent for future environmental trade provisions.

Political deliverance: For Keir Starmer, it is the first major trade victory under his administration and complements earlier deals with Australia, New Zealand, and the CPTPP (an 11-member free-trade deal made up of countries originally part of the Trans-Pacific Partnership before the United States withdrew). For Modi, it is the first comprehensive free-trade agreement in a decade and feeds into his “Make in India” narrative, reinforcing the country’s credentials as a global investment destination. The commitment to a relationship with Starmer visiting India at the “earliest opportunity”.

A few challenges: Business lobbies cautioned that rules of origin, regulatory alignment, and QCOs could dilute the deal’s benefits if implementation falters. Indian negotiators secured a mechanism to address carbon-border adjustments, but Europe’s evolving Emissions Trading System and future green standards may still impose compliance costs. Meanwhile, the absence of visa liberalization reflects domestic political sensitivities in the UK over net migration, potentially limiting talent mobility even as services trade expands on paper.

Broadly, this could catalyze momentum for India to talk to the US and EU. In particular, nations can be inspired to pursue early mutual wins in negotiations by blending tariff cuts with sectoral safeguards.

Options are… Back?

Equity derivatives trading in India has snapped back, rebounding from the post-regulatory lull to reach fresh highs in April. On the NSE, average daily notional turnover in futures and options climbed to $2.7 trillion (₹229 trillion), the strongest since SEBI’s tightening last November compelled many participants to pare back speculative one-week expiries and adjust to tougher margin and position limits. That resurgence underscores how quickly activity flows back in when volatility and foreign flows realign.

Foreign institutional investors, shaken out earlier by tariffs, returned forcefully in April by buying $1.3 billion (₹109.6 billion) of Indian equities, and their re-entry has driven both directional and hedging demand in the derivatives market. The NSE’s VIX, which spiked to its highest level since Modi’s election immediately after the April 2 tariff announcement, only retraced slightly before geopolitical flare-ups with Pakistan rekindled uncertainty. In such an environment, option traders thrive: premium turnover on the NSE jumped 14 percent in April, while the BSE saw a 25 percent surge to an all-time high.

That renewed volatility has not been confined to the main market. At GIFT City’s international bourse, Nifty monthly derivatives turnover topped $100 billion (₹8.4 trillion) in April, a record that highlights India’s growing pull as a global trading hub. Traders are also extending trades from short-dated to longer-term tenors due to regulation plus protection against short-term volatility blips.

The volume has some risks: Turnover rises on rallies and subsides on corrections, so a prolonged sell-off (easing tariffs, de-escalation with Pakistan, or flight to safety) could temper the volatility fervor. Likewise, if volatility normalizes, the window for selling options to capture premiums would narrow.

The interplay between regulatory design and market behavior remains crucial. SEBI’s initial measures of higher margins on weekend and Monday expiries, plus strict block positions, were intended to dampen excessive leverage without stifling core hedging activity. The April bounce suggests that, having adapted, participants now view the revised framework as workable. Further tweaks will need to balance systemic risk with the liquidity benefits that a deep derivatives market provides to India’s broader equity ecosystem.

Reliance is Winning the Soda War.

Reliance’s Campa Cola is unseating one of the biggest duopolies, Coke and Pepsi, by leveraging Reliance Retail’s vast distribution network and a razor-sharp price point to win double-digit share in key regions within two years of its 2022 relaunch. By offering 200 ml bottles at just $0.12 (₹10) — a 50 percent discount to market leaders — Campa has tapped into India’s highly price-sensitive consumer base, where per-capita GDP stood at a modest $2,481 (₹209,148). Reliance projects Campa’s revenue to surge 150 percent to $118.6 million (₹10 billion) in FY25, versus Coke’s reported $557.5 million (₹47 billion) for FY24.

Telecom similarity: This move echoes Reliance’s 2016 telecom offensive, where free voice and ultra-cheap data forced sector-wide consolidation; today, it is the soft-drink oligopoly that is feeling the squeeze. Coke and Pepsi have responded in kind, with Coke cutting its price to $0.18 (₹15) in some markets, and both incumbents have introduced no-sugar variants and expanded cooling infrastructure. Most research analysts believe the pricing war could persist medium term since legacy players are going to have to cut retail margins and invest in chilling equipment rapidly to maintain share against Reliance.

Reliance is not just stealing volume but is also making soft drinks accessible to lower-income cohorts. In a country where 200 ml of soda once felt like a luxury, a low entry point has effectively lowered the barrier to occasional indulgence. Yet this strategy faces its limits: despite a burgeoning middle class, discretionary spending remains constrained, and consumption frequencies for even low-priced beverages are unlikely to match Western norms. Thus, long-term growth will hinge on Reliance’s ability to balance ultra-value pricing with realistic volume forecasts.

Competitors beyond the cola giants are likewise scrambling. Tata Consumer Products, which markets Gluco+ at similar price tiers, acknowledged missing on retail margins when Campa arrived, prompting a swift re-indexing of incentives and distribution upgrades. Dabur, too, has faced pressure to revitalize its juice and soda lines. Such reactions highlight how Reliance’s market entry has forced incumbents to revisit both pricing and distribution economics — investments that may erode short-term profitability but are necessary to defend.

Reliance’s strategy: In February, Campa began rolling out in the UAE, testing whether its low-cost model can scale internationally where expatriate Indian communities and price-hungry Gulf consumers coexist. If successful, this could validate Reliance’s playbook of acquiring dormant local brands, super-charging them with deep pockets and distribution power, then exporting the model abroad. This model has been executed in utilities, telecom, and retail.

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Gupshup.

Macro

• Immigration crackdowns in the US put billions of remittances at risk. Remittance is the act of people in other countries, say the US, sending money back to their home countries, like India. An example is a village in Gujarat, India, which is outfitted with outlandish amenities due to dollars coming back. There are $800 billion (₹67.4 trillion) in global remittances, with the vast majority coming from the US.

Equities

• Ather, an e-scooter company, sees a 6 percent drop in share price post-IPO. The raise today was for $354 million (₹29.8 billion) and was India’s first major listing this year (FY starting in April). The company is valued at 6x EV/Sales, which trades above peers. Additionally, investors are likely wary of e-scooters given what happened to Ola’s 37 percent drop since its IPO.  

• BSE shares will continue to rally from the earnings rise due to derivatives. Increased trading volume will benefit earnings after options have already led to a 70 percent rally in the stock. Rival clearing houses deferred plans to increase derivatives platforms, which has led to BSE shares rising precipitously over the last month.  

Alts

• Jio Finance plans a rupee bond sale of $118 million (₹9.9 billion). The shadow lender is raising the funds through 2028 bonds that have a 7.2 percent coupon. Bidding for issuance will begin early next week. Jio Finance provides mortgages, collateralized loans, corporate lending, and life/PNC insurance.

• ​​Ex-Temasek investors are launching a $400 million (₹33.7 billion) growth equity fund for India. LaunchBay will take minority stakes of $25-50 million (₹2.1-4.2 billion) in 8 to 10 companies across health care and consumer companies. 

• Ex-ArcelorMittal executive is looking for $1 billion (₹84.3 billion) for his latest private credit fund. Synergy Capital wants to raise by next year to continue its foray into industrial private credit, plus a small amount of private equity. At least half of the fund will invest in India. Maheshwari already has commitments of $700 million (₹59 billion) and is willing to exceed the billion-dollar target if interest rises. 

• SMFG is looking to buy a minority stake in Yes Bank. The Japanese lender has not specified the size or payment terms, but this continues a trend of Japanese investors looking for foreign returns. SBI has pared its holdings in Yes Bank, which has led to shares declining, but the rumor has made Yes Bank pop nearly 10 percent on the day.  

Policy

• Airlines are avoiding Pakistani airspace as tension with India rises. There are now more global flight detours with additional hours and fuel burn. In particular, most European airlines are avoiding contested airspace while Middle Eastern airliners are using conventional routes.  

• Pakistan alleges that India is choking off the Chenab River by 90 percent of its usual volume. Even before this cut-off, Pakistan’s farms were expecting 20 percent less water due to natural reasons, though that will now be exacerbated. Such actions only lead to the acceleration of war and conflict.

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.