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Desperate Times, Desperate Investments
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Good Morning. In the last few years, India’s IPO market has been on fire. More recently, the IPO of an online marketplace company was fully subscribed, and more such IPOs are on the cards. Retail investors are piling money into mutual funds and other investments in the market. But this isn’t coming from confidence. Dig deeper, and it looks more like desperate measures during desperate times — stagnating incomes and rising inflation.
In other news, Bihar, a state going to polls, gets a transport bonanza from the government. Meanwhile, China’s electric vehicle (EV) maker BYD is making a fresh push for India.
THE TAKE
What’s Behind India’s Investment Frenzy?
The appetite of Indian retail investors appears to know no bounds.
The Economic Times says investors forked out over Rs 2,700 crore in just four hours on September 9 to invest in IPOs of a range of companies.
A key one is a marketplace for services whose business model is conceptually challenged and practically unsound.
Moreover, the company reported a handsome profit.
It’s Capitalism, After all
This is good news except that the timing of these rosy numbers ahead of a mega IPO, meant to mostly help its venture capital investors exit their investments should surely raise an eyebrow or two.
Diving in, the company’s revenue from operations jumped 38% in the last year to Rs 1,144 crore, a rise that is creditable but also begs the question as to what happened in the last year that caused people to hire the services of more carpenters and masseurs or such in such large numbers.
Meanwhile, profits jumped dramatically to Rs 239.8 crore, which is obviously a remarkable turnaround from a net loss of Rs 92.7 crore in FY24.
Of course, the profits would have been less spectacular were it not for the Rs 211 crore recognition of a deferred tax asset, all figures from HDFC Securities.
India was the second-largest IPO market in the world last year, raising over $20 billion and this year that figure could touch $28 billion.
If all goes well for the companies in the race, that’s another several hundred thousands of crores of investor savings transferred into the hands of institutional investors, founders and promoters.
Nothing wrong, after all, it is capitalism.
Desperate Times, Desperate Investments
Except that small investors seem to be investing out of sheer desperation rather than strategy.
And that applies to large and small investors locked into the Indian markets.
Indian institutional investors, including mutual funds, are buying stocks because there is no other place to invest.
Small investors are putting money into mutual funds and investing directly because high inflation and stagnant incomes are making them desperate for avenues other than traditional bank deposits.
Most youngsters may not even know what a bank deposit is.
And poorly regulated content on social platforms powered by stockbrokers, funnelling traders into slick apps, completes the chain and flow of funds.
Dhirendra Kumar of ValueResearch in a recent article pointed out that debt is climbing — household debt load is now nearly 38 per cent of GDP, and liabilities are rising faster than savings.
The most visible sign is that credit card outstandings surged from Rs 2.53 lakh crore to Rs 2.92 lakh crore in just a year.
When viewed together, combined with the sheer flows into equity markets at a time when the fundamentals are not so strong, the signs are worrying.
Fear And Frenzy
Not that anyone cares, the number of individual brokerage accounts has crossed 200 million now or one for every seven Indians, as an article in The New York Times on India’s investing frenzy pointed out.
The individual retail investor story is actually similar to other markets. Wall Street is moving similarly and quite irrationally, you could argue.
For instance, each time there is a negative jobs report, markets jump up. Why? Because there could be an interest rate cut, which will bring in more capital.
Gold prices are skyrocketing too, hitting fresh highs, along with Wall Street.
They are rising because of the apprehensions among investors of the US economy and the impact of tariffs and the post-Trump world, not to mention wars.
It’s not often that fear and greed co-exist so effortlessly.
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CORE NUMBER
Rs 7,616 crore
That’s the combined value of two big-ticket transport projects cleared by the Cabinet Committee on Economic Affairs on Wednesday — both in Bihar, which is going to polls soon.
Driving the news: Rs 4,447 crore will fund an 82.4 km four-lane greenfield highway between Mokama and Munger, part of the Buxar–Bhagalpur corridor. The road will cut travel time to 1.5 hours, enable 100 kmph freight movement, and generate 3.3 million man-days of work.
Rs 3,169 crore will double the Bhagalpur–Dumka–Rampurhat railway line, boosting passenger and freight capacity across Bihar, Jharkhand and West Bengal.
Why it matters: The projects tie together industrial hubs, pilgrimage sites, and 2.8 million people — with clear political weight in Bihar’s poll year.
FROM THE PERIPHERY
India Seeks Rare Earth Alternative
India is exploring a new, unconventional route to secure rare earths like critical minerals used in EVs and advanced tech—by engaging with Myanmar’s Kachin Independence Army (KIA), a powerful rebel group.
What’s Next? According to Reuters, India’s Ministry of Mines asked state-run IREL and private firm Midwest Advanced Materials to work with the KIA, which controls key mines in Kachin state. Samples are already being gathered for Indian labs to test, with talks underway on possible bulk exports.
How We Got Here: The move comes as China, which dominates rare-earth processing, has curbed exports amid geopolitical tensions. While Delhi eyes a long-term supply route, logistical hurdles and limited domestic refining capacity remain. The KIA, still battling Myanmar’s junta, already supplies China, raising the stakes in this strategic competition.
India Claims Tariff Impact Limited
India’s Chief Economic Advisor V Anantha Nageswaran claimed on Wednesday that the negative impact of US tariffs on the Indian economy will be partly cushioned by recent goods and services tax (GST) cuts, Reuters reported. He said the tax reductions, announced by Prime Minister Narendra Modi’s government, would boost domestic demand and provide “compensating effects.”
Flashpoint: According to him, the combined impact of higher US tariffs and lower GST will trim India’s GDP growth by 0.2-0.3% points, with the overall projection for this year remaining at 6.3-6.8%.
What's Next? Nageswaran added that while the prolonged tariff uncertainty effect of the 25% US penalty duty — linked to India’s Russian oil purchases — may be limited, prolonged tariff uncertainty could weigh more heavily on the economy.
US Plays Both Sides?
On Tuesday, US president Donald Trump wrote on Truth Social that India and the US are continuing negotiations on a potential trade deal. On X, PM Modi said that India appreciates and reciprocates US-India ties.
The Lead: Trump’s post comes soon after the US began charging India a 50% duty on most of its exports. Though Trump said kind words about India, he reportedly also urged the European Union to levy a 100% tariff on India and China, both of which are major buyers of Russian oil.
Catch Up Quick: India is hedging its bets, too. Late last month, Prime Minister Narendra Modi visited Tianjin in China for the Shanghai Cooperation Organisation (SCO) summit. News outlets captured him laughing with leaders of China and Russia; India has also been mending its broken relationship with China for the past year.
BYD’s Increasing Interest in India
China’s EV giant BYD is sending senior staff to India, signalling a fresh push after relations between Modi and Xi Jinping improved at the SCO summit, according to a Bloomberg report. The team will review its plant in southern India, restart training programmes, and seek approval to raise imports beyond the 2,500-unit annual limit.
The Lead: BYD is also considering launching its Atto 2 compact SUV early next year, aiming to price it below Rs 20 lakh.
Impact: Compact EVs are increasingly attractive in India, where buyers want affordable, city-friendly cars. Models like Tata’s Nexon EV and MG’s ZS EV have the largest market share right now.
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