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Three big stories in Indian markets you can't miss.

January 28, 2025

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:

  • It’s time to be optimistic about your bond holdings,

  • Bad news for your real estate stocks,

  • and, an asset management behemoth enters India’s private credit market.

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

Have a question you want us to answer? Fill out this form and you could be featured in our newsletter.

—Shreyas, [email protected]

Market Update.

Future of India: Expert Panel & Networking

Seats are running out for 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.

Bond Optimism.

India’s bond market is poised for further gains as analysts anticipate a reduction in government borrowings supporting yields in the face of global economic uncertainties. Modi is projected to announce $132 billion (â‚ą11.4 trillion) in market borrowings for the fiscal year starting April 1, down from $134 billion (â‚ą11.6 trillion) in FY25. Gross borrowings may still rise to $169.9 billion (â‚ą14.7 trillion) due to longer debt maturities. The fiscal policy is expected to focus on fiscal consolidation, with Sitharaman targeting a budget deficit of 4.5 percent of GDP in the upcoming fiscal year.   

Favorable market effects. The optimism around reduced bond supply has already buoyed Indian government securities, with the 10-year bond yield dropping to its lowest levels in nearly three years. Economists predict yields may ease further, falling to 6.50 percent by the end of 2025, a significant improvement from current levels.  

The RBI is expected to play a significant role in stabilizing the bond market by acting as a key buyer of sovereign debt. Recent announcements have highlighted the central bank’s proactive measures to ease liquidity pressures with $18 billion (₹1.6 trillion) in bond purchases, forex swaps, and additional reverse repo plus another ~$18 billion (₹1.6 trillion) of bond purchases when FY26 starts later this year.

Foreign help is dying down: India’s inclusion in JPMorgan’s emerging market bond index is nearing its full 10 percent weight by March, which has already contributed to significant inflows in the past year. In 2024, bonds eligible for index inclusion attracted $14.3 billion (₹1.2 trillion), pushing yields lower by 41 basis points. The RBI has already realized that it has to step in for the lack of new foreign investment.

Real Estate Stocks Plunge.

Indian real estate stocks and valuations are facing a sharp selloff: the Nifty Realty Index has plunged 20 percent in January thus far, with forward price-to-earnings at 32x compared to the three-year average of 37x. 

As usual, buy the dip: Most analysts view this as a buying opportunity, akin to broader Indian markets, as risks remain largely macroeconomic. Real estate demand is now driven by wealthy Indians purchasing luxury properties, marking a shift from when even foreigners saw land as an investment. Notably, DLF, focused on luxury apartments, has declined only 12 percent, outperforming the broader market.

The industry stands to benefit from further consolidation. Adani Realty's potential merger with Emaar could position it among the top five by revenue. Consolidation has improved unit economics in the industrial and telecom sectors and is likely to do the same in the REGAL sector by reducing competition.

Ares Enters India.

Ares Management, a $464 billion (â‚ą40.1 trillion) asset manager, is focusing on acquisition financing and real estate loans. Domestic players have been contending with tight regulations while foreign players have been given more leeway from a government eager to increase FDI. 

Ares has deployed $4.5 billion (â‚ą389 billion) into Indian companies by looking at cash-generating assets that thrive alongside economic expansion. Ares has been targeting deals between $50 and $200 million (â‚ą4.3 and â‚ą17.3 billion) of value seeking 10 percent or higher on credit. Their special situations warrant 20 percent or more in returns.

Why now? India’s tight banking regulations has ushered in a golden era of private credit, something Ares is all to happy to take advantage of. Infrastructure driving a boom in private credit. Thus far, private credit firms have funded solar energy, roads, and other developments due to the tight domestic banking regulations.

Bullish: Ares forecasts double-digit growth in its allocation in the Indian credit market during 2025, largely driven by rotating money out of China’s deepening real estate and debt crisis. 

Gupshup.

Macro

Equities

Alts

Policy

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.