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Bihar Win, Tariff Woes
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Good Morning. NDA's win in Bihar has eased coalition jitters that many had about the government at the Centre. But is majority optics really the same as stability? In the past, India has thrived under coalition governments while struggling under stronger ones. Right now, India's tests lie abroad, which is landing a trade deal with the US even as Trump's tariffs and theatrics pose challenges to trade talks.
Indian equity indices on Thursday were close to the record levels they achieved in 2024. The BSE Sensex gained 446.21 points or 0.52%, closing at 85,632.68. The NSE Nifty50 gained 139.50 points or 0.54%, closing at 26,192.15, after hitting a 52-week high of 26,246.65 during the day.
In other news, Reserve Bank of India (RBI) Governor Sanjay Malhotra attributed the rupee’s recent slide to stronger demand for the US dollar. Meanwhile, a drop in immigration could be a problem for the US.
NDA’s Bihar Boost, Hopes Still Up On US Trade Deal: The Week That Was
Bihar has presented the National Democratic Alliance (NDA) at the Centre with a sterling electoral victory. Nitish Kumar has been sworn in as chief minister for the 10th time.
The fact that the NDA has won all, save two, state assembly elections held since the 2024 Lok Sabha elections serves, in the eyes of many, to shake off doubts about the stability of the ruling coalition created by the BJP’s failure to secure a simple majority, leave alone the two-thirds majority it had been seeking.
Majority Isn’t Stability
Political stability is not about the stability of the regime in place. The Rajiv Gandhi government (1984-89) had a brute majority in the Lok Sabha and so embodied regime stability. But India was in political turmoil from Punjab and Kashmir to Tamil Nadu.
The Narasimha Rao government that carried out India’s reforms and opening up was a minority government during its initial, most active years. Yet it presided over elections in Kashmir and Punjab, and, after the demolition of the Babri mosque and the violence that followed in its immediate aftermath, heralded a period of zero communal violence till the end of the decade.
With or without an absolute majority for the BJP in the Lok Sabha, there is no threat of political instability in India, with or without political success in state elections. The terror strike in Delhi is a troubling incident, but as yet there is no reason to see it as the beginning of a trend of disruption from within.
Trump’s Tariff Tale
Indian officials continue to be upbeat about signing a trade deal with the US. The only worry is that Trump keeps repeating his claim that his intervention stopped a nuclear war between India and Pakistan in May.
In his latest iteration of what can only be considered a plea for nomination for the Nobel Peace Prize, Trump claimed he had threatened import tariffs of 350% if India and Pakistan did not stop fighting. While on his Asia tour, he had claimed to have threatened penal tariffs of 250% on the South Asian contenders.
Meanwhile, NVIDIA’s Q3 results eased jitters about an AI bubble, troubled brewing between China and Japan, even as Trump was embarrassed by details from a Jeffrey Epstein email.
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CORE NUMBER
855 million tonnes
That’s the total cargo India’s seaports handled in FY2025, up nearly 4% year-over-year, underscoring the growth of the country’s maritime economy as port modernisation accelerates, according to CBRE's latest report titled India Infrastructure Series: Seaports – Anchoring Maritime and Economic Growth.
Why It Matters: India moves 95% of its merchandise trade by volume through its ports. Rising throughput signals stronger industrial activity, smoother logistics, and improving global competitiveness at a time when the government is pushing hard on multimodal connectivity and export-led growth.
Context: These gains are triggering industrial corridor expansion, warehousing growth, and new SEZ activity across India’s coastline, deepening the country’s port-led development push, the CBRE report said.
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FROM THE PERIPHERY
RBI Explains Depreciation
RBI Governor Sanjay Malhotra said on Thursday that the central bank does not target any particular exchange rate for the rupee, and that its recent slide was primarily due to stronger demand for the US dollar, PTI reported. Speaking at the Delhi School of Economics, he said currency movements were driven by market forces and emphasised that India’s foreign exchange reserves remained healthy enough to safeguard the economy.
Setting: Malhotra said the RBI’s foremost priority is to maintain financial stability while simplifying regulations without weakening essential safeguards. He noted that the rupee’s current pressure was influenced by recent US tariff actions. He added that a favourable trade agreement with Washington would help ease the strain on India’s current account.
Context: The governor’s remarks come amid continued pressure on the rupee, which has weakened in recent sessions as global dollar demand rises and uncertainty persists over the US interest-rate outlook.
Polyester Under Pressure.
The government’s withdrawal of the Quality Control Order (QCO) on key polymer and fibre intermediates will ease costs for downstream textile players, especially readymade garment makers, by enabling access to cheaper imported inputs, according to a Crisil Ratings report. However, it will intensify competition for polyester yarn producers.
Flashpoint: An analysis of 20 major yarn makers indicates pressure on realisations as imports rise and crude prices soften, keeping their revenue growth flat at 3–5% next fiscal despite a likely volume uptick.
By The Numbers: Spreads may shrink 10–15%, narrowing operating margins by about 100 bps to 5.5–6%, and reducing interest cover to 2.7–2.9 times. The readymade garment segment, already hit by 50% US tariffs, stands to gain the most, while home textiles will benefit modestly, given their heavier reliance on cotton-based exports.
IndusInd’s Big Cleanup
IndusInd Bank is set to launch a major restructuring aimed at boosting profitability and fixing operational underperformance, new CEO Rajiv Anand told Bloomberg News. The Hinduja-backed lender has faced turbulence after a Rs 1,960 crore accounting discrepancy that prompted the exit of its former CEO and several senior executives. Since then, IndusInd has overhauled key control functions, appointed a new internal auditor and assurance team, and will bring in a new chief risk officer by January.
Overview: The revamp, expected within days, will streamline processes, remove low performers without reducing overall headcount, and increase investments in artificial intelligence. The bank also plans to expand its retail portfolio to strengthen its balance sheet. Anand said the bank had accumulated “organisational cholesterol” that slowed execution.
Impact: With profitability lagging peers, IndusInd posted a -0.33% return on assets in the September quarter versus Kotak Mahindra Bank’s 1.88%. Anand aims to lift ROA to 1% within 18 months and said the bank remains well capitalised, with growth focused on home loans, MSME lending and wealth management.
Immigration Drop Shock
A sharp drop in immigration could slow — or even shrink — the US labour force in the coming years, according to new research from the Federal Reserve Bank of San Francisco. Net migration has fallen to about 515,000 people this year from nearly 2 million in 2024, driven by fewer undocumented arrivals, higher emigration and an estimated 285,000 inland deportations. Researchers warned that this slump threatens persistently weak growth in the working-age population.
Why It Matters: The review found that without immigration, the US working-age population would likely have started contracting as early as 2012. With fewer native-born Americans entering adulthood until 2040 and baby boomers continuing to retire, the labour pool and consumer demand face structural pressure.
Fast Facts: The report lands amid debate over labour shortages and the impact of stricter enforcement under President Trump, who has nonetheless defended the H-1B visa programme, saying the US still needs specialised foreign talent.
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A 14-month wait is coming to an end as markets inch close to all time highs
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