Category: News

Borrowers Cheer, But Savers Face a Setback as Deposit Rates Likely to Fall

In a surprise move, the Reserve Bank of India (RBI) has announced a significant 50 basis points (bps) cut in the repo rate, bringing it down to 5.50% during its June 2025 Monetary Policy Committee (MPC) meeting. This marks the third consecutive rate cut since February 2025, aimed at accelerating economic growth amid easing inflation.

Alongside the repo rate cut, the central bank has also slashed the Cash Reserve Ratio (CRR) by 100 bps to 3%, unlocking approximately ₹2.5 lakh crore worth of lendable funds for the banking system.

Why Did RBI Cut the Repo Rate?

The primary factor behind the aggressive rate cut is the continued moderation in retail inflation. Headline CPI inflation dropped to 3.2% in April, its lowest level since July 2019, down from 3.3% in March. The decline has largely been driven by falling food prices.

With inflation remaining consistently below the RBI’s 4% target over the past three months, the central bank has found room to ease monetary policy without jeopardizing price stability. Under the Flexible Inflation Targeting (FIT) framework, the RBI aims to maintain CPI at 4%, with a tolerance band of ±2%.

RBI Governor Sanjay Malhotra stated, “With core inflation expected to remain benign, frontloading the rate cut is imperative to support growth amid global uncertainties and tariff-related pressures.”

Impact on Borrowers and Savers

The rate cut will come as welcome news for borrowers, especially those with home or personal loans linked to external benchmark lending rates (EBLR). Loan EMIs are expected to fall by approximately ₹800–₹1,200 per ₹1 lakh of loan, depending on the loan tenure and bank’s pass-through mechanism.

However, the move will likely hurt savers and depositors. Banks are expected to reduce deposit interest rates to align with falling lending rates. Savings accounts already yield historically low returns — some as low as 2.7% — and may face further reductions.

Bond Markets React Positively

Bond markets are expected to rally as lower interest rates drive up bond prices and reduce yields. Government securities, in particular, are likely to see increased investor demand, offering capital gains to existing bondholders and enhancing overall returns on fixed-income portfolios.

Economic Forecasts: Growth Holds, Inflation Revised Downward

The RBI retained its real GDP growth projection at 6.5% for FY2025-26, citing a rebound in private consumption, resilient corporate and bank balance sheets, and continued government capital expenditure. The central bank expects the Indian economy to remain the fastest growing major economy globally.

Inflation projections for FY2025-26 have been revised downward to 3.7%, thanks to easing supply chain bottlenecks, falling global commodity prices, and expectations of an above-normal monsoon boosting agricultural output.

Key Highlights from RBI June 2025 Policy

• Repo Rate: Reduced by 50 bps to 5.50%
• CRR: Reduced by 100 bps to 3%, releasing ₹2.5 lakh crore liquidity
• CPI Inflation (FY26): Projected at 3.7%
• GDP Growth (FY26): Maintained at 6.5%
• Policy Stance: Shifted from ‘Accommodative’ to ‘Neutral’

With inflation under control, the RBI has chosen to stimulate the economy through aggressive rate cuts. While this offers relief to borrowers and supports investment sentiment, savers may need to explore alternative investment options to maintain real returns.

Stay tuned to our platform for more updates and expert analysis on what these changes mean for your portfolio.

Source: The Indian Express

In a stormy 2025 for Indian mutual funds, about 70% of mutual fund schemes across equity, debt, hybrid, and precious metals categories have delivered positive year-to-date (YTD) returns, showcasing resilience amid global tensions and market volatility.

Market Snapshot: Tepid Equities, High Volatility

The Indian equity market has experienced muted returns so far in 2025. The Nifty 50 index gained only 4.68% YTD till May 28, while the Nifty Midcap 150 and Nifty Smallcap 250 indices fell 0.46% and 5.89% respectively. Earlier in the year, the indices saw significant drawdowns, with the midcap and smallcap indices dropping up to 26%, reflecting heightened volatility due to:

• Ongoing US-China trade tensions

• Weak domestic earnings

• The India-Pakistan conflict

Nirav Karkera, Head of Research at wealthtech firm Fisdom, notes that “Indian equities were undergoing a healthy correction phase even before these events, making valuations attractive and creating pockets of opportunity that many thematic mutual funds have capitalized on.”

Key Performance Highlights: Defence, Gold, BFSI Lead Gains

Data from ACE MF, a mutual fund research platform, highlights that out of nearly 1,800 mutual fund schemes, about 1,650 funds with at least five months of track record show that 1,162 schemes are posting positive returns YTD.

• Top performer: The DSP World Gold Fund of Fund (FoF), investing in gold and gold mining companies, led gains boosted by a 25% rise in international gold prices.

• Gold funds overall have delivered an impressive average YTD return of 24%, driven by geopolitical uncertainty, tariff wars, and stock market volatility.

• The defence mutual fund category topped the charts with average returns exceeding 30% YTD, fueled by the India-Pakistan conflict and government approval of Rs 54,000 crore in defence orders.

• The Banking, Financial Services, and Insurance (BFSI) funds also performed well, returning an average of 8% YTD, as valuations in major banks became attractive, offering value investment opportunities.

Kirtan Shah, founder of Credence Wealth, adds, “Value investing has been the preferred strategy in BFSI funds, especially with many banks trading near pre-COVID valuation levels.”

Underperformers: IT, Digital, Smallcap Funds Lag

Not all sectors have fared well in 2025:

• Information Technology (IT) mutual funds are the worst performers, down over 11% YTD due to tariff-related uncertainties and the impact of the US Department of Government Efficiency’s (DOGE) spending cuts.

• Digital India thematic funds, along with smallcap and momentum funds, have also seen weak performance amid cautious investor sentiment and market turbulence.

Investment Strategy Outlook for 2025

According to experts, value investing remains key in the near term as markets transition from a correction phase:

• Kirtan Shah highlights ongoing uncertainty over global policies and interest rate dynamics.

• Motilal Oswal Private Wealth suggests that while largecap valuations have moved from attractive to fair, emerging selective opportunities exist in midcap and smallcap stocks.

Their recommended approach includes:

• Lump sum investments in hybrid, largecap, and flexicap funds.

• A staggered investment strategy over 2-3 months for midcap and smallcap funds, taking advantage of market pullbacks for more aggressive exposure.

The Indian mutual fund industry has scaled a historic high, with assets under management (AUM) crossing ₹70 trillion in March 2025 — marking a 22.25% year-on-year (YoY) growth, according to a report by ICRA Analytics. This robust expansion underscores rising retail participation and growing investor confidence, despite global uncertainties.

Equity, Hybrid, and Passive Funds Lead the Surge

Open-ended “other schemes” — which include index funds, ETFs, and FoFs investing overseas — posted the highest YoY growth at 23.80% in April 2025, followed by equity mutual funds (23.57%) and hybrid schemes (20.74%), as per data from the Association of Mutual Funds in India (AMFI).

Within the passive investment segment:

• Gold ETFs witnessed an explosive 87.33% YoY growth, reaching ₹61,422 crore.

• Index funds recorded a 31% YoY growth, taking the total AUM to ₹2,92,206 crore.

Sectoral and Debt Schemes Also Shine

In the equity category:

• Sectoral/thematic funds saw the highest AUM growth at 49.94%, followed by

• Multi-cap funds, which grew 35.79% YoY.

In the debt segment:

• Long duration funds surged by 58.14% YoY.

• Money market and ultra-short duration funds grew by 44.79% and 32.78% respectively.

Retail Participation on the Rise

The total number of mutual fund folios rose by 30.21% YoY as of April 2025. This growth was primarily led by:

• A 45.94% increase in folios for “other schemes”,

• A 31.39% rise in equity scheme folios.

However, debt scheme folios declined by 1.15%, suggesting a shift in investor preference toward equities and passive products.

Equity Inflows Continue Amid Global Tensions

Despite headwinds from geopolitical tensions and reciprocal tariffs imposed by the U.S., investor confidence remained resilient:

• Equity mutual funds recorded net inflows of ₹24,269.26 crore in April 2025.

• This marked the 50th consecutive month of positive inflows in the equity segment since March 2021.

• Although inflows dipped 3.24% month-on-month (MoM), they rose 28.29% YoY, reflecting long-term investor discipline.

ETFs and SIPs See Steady Growth

Domestic ETFs (excluding Gold ETFs) attracted record net inflows of ₹19,057 crore, reflecting a shift toward low-cost passive investing.

SIP (Systematic Investment Plan) metrics also showed strong growth:

• Total SIP accounts rose 5% YoY to 914.41 lakh.

• SIP contributions grew 31% YoY to ₹26,632 crore in April 2025.

• SIP AUM rose 23% YoY, and now comprises 19.85% of total mutual fund AUM.

In a historic economic milestone, India has officially surpassed Japan to become the fourth-largest economy in the world, confirmed NITI Aayog CEO BVR Subrahmanyam. Citing data from the International Monetary Fund (IMF), Subrahmanyam stated that India’s GDP has now reached USD 4 trillion, placing it behind only the United States, China, and Germany.

India’s Economic Rise: From Fragile to Fourth

“We are the fourth largest economy as I speak,” said Subrahmanyam, adding that India was ranked fifth until 2024. He emphasized that favorable geopolitical conditions and robust economic planning have supported this rapid ascent. The IMF projects India’s nominal GDP to hit USD 4.19 trillion in 2025, slightly ahead of Japan, thus marking this transition.

India’s journey is particularly remarkable given its past classification as part of the “fragile five” economies. Over the past decade, India has emerged as a global growth engine, now firmly positioned among the top global economies.

Steady Growth Path and Vision for 2047

According to the IMF’s World Economic Outlook (April 2025), India’s economy is projected to grow at 6.2% in FY 2025-26, driven by strong private consumption, especially in rural areas. This is significantly higher than the projected global growth rate of 2.8% for the same period.

India’s per capita income has doubled from USD 1,438 in 2013–14 to USD 2,880 in 2025, signaling improved living standards and economic inclusion.

Looking ahead, the NITI Aayog’s “Viksit Bharat @2047” vision outlines India’s ambition to become a USD 30 trillion economy and a high-income nation by its 100th year of independence. The framework focuses on six strategic pillars:

1. Macro-Economic Goals and Strategy

2. Empowered Citizens

3. A Thriving and Sustainable Economy

4. Technology and Innovation Leadership

5. Global Leadership – Vishwa Bandhu

6. Governance, Security, and Justice Delivery

India Poised to Become 3rd Largest Economy by 2028

With its current growth momentum and strategic policy reforms, India is on track to overtake Germany and emerge as the third-largest economy in the world within the next 2.5 to 3 years, according to Subrahmanyam.

The US has imposed a 26% reciprocal tariff on Indian goods (effective April 9, 2025) and a 34% tariff on Chinese goods under President Trump’s “Liberation Day” policy. While this presents short-term challenges, it also creates strategic openings for India.

𝐄𝐜𝐨𝐧𝐨𝐦𝐢𝐜 & 𝐒𝐞𝐜𝐭𝐨𝐫𝐚𝐥 𝐈𝐦𝐩𝐚𝐜𝐭
𝐄𝐱𝐩𝐨𝐫𝐭 𝐋𝐨𝐬𝐬𝐞𝐬: India’s exports to the US ($77.5B in FY24) could decline by $2.71B annually (-3–3.5%).
𝐆𝐃𝐏 𝐄𝐟𝐟𝐞𝐜𝐭: Growth may slow by 5–10 bps, but strong domestic consumption provides a buffer.
𝐂𝐡𝐢𝐧𝐚’𝐬 𝐁𝐢𝐠𝐠𝐞𝐫 𝐇𝐢𝐭: With $575B in US exports, China faces an estimated $195.5B loss-far exceeding India’s impact.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐢𝐞𝐬 𝐚𝐭 𝐑𝐢𝐬𝐤 & 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬
𝐓𝐞𝐱𝐭𝐢𝐥𝐞𝐬/𝐀𝐩𝐩𝐚𝐫𝐞𝐥: $9.6B exports at risk; India (26% tariff) could gain as China faces 34%.
𝐏𝐡𝐚𝐫𝐦𝐚𝐜𝐞𝐮𝐭𝐢𝐜𝐚𝐥𝐬: Price pressure, but India strengthens its lead over China.
𝐆𝐞𝐦𝐬/𝐉𝐞𝐰𝐞𝐥𝐥𝐞𝐫𝐲: 30% of exports to the US vulnerable, yet India edges out China.
𝐄𝐥𝐞𝐜𝐭𝐫𝐨𝐧𝐢𝐜𝐬: Over 50% of exports affected, but India benefits from China’s higher tariff.
𝐀𝐮𝐭𝐨𝐦𝐨𝐛𝐢𝐥𝐞𝐬 & 𝐏𝐚𝐫𝐭𝐬: India’s $2.6B export exposure is lower than China’s.
𝐀𝐠𝐫𝐢𝐜𝐮𝐥𝐭𝐮𝐫𝐞: India’s high tariffs (39–100%) could invite retaliation, but China’s losses shift US focus.

𝐓𝐮𝐫𝐧𝐢𝐧𝐠 𝐚 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞 𝐢𝐧𝐭𝐨 𝐚𝐧 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐲
𝐓𝐫𝐚𝐝𝐞 𝐃𝐢𝐯𝐞𝐫𝐬𝐢𝐨𝐧: China’s $195.5B export loss leaves a gap in US markets—India can step in.
𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐄𝐝𝐠𝐞: India’s diversified supply chains and growing trade routes (e.g., Middle East) provide an advantage.
𝐑𝐞𝐬𝐢𝐥𝐢𝐞𝐧𝐭 𝐄𝐜𝐨𝐧𝐨𝐦𝐲: Unlike China’s export-reliant model, India’s domestic-led growth mitigates risks.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐍𝐞𝐱𝐭 𝐒𝐭𝐞𝐩𝐬
𝐔𝐒 𝐓𝐫𝐚𝐝𝐞 𝐓𝐚𝐥𝐤𝐬: Push for exemptions in BTA negotiations, targeting $500B trade by 2030.
𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧: Accelerate FTAs with the UK, Canada, and EU (potential $15B+ gains by 2030).
𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐒𝐮𝐩𝐩𝐨𝐫𝐭: Address non-tariff barriers and leverage China’s tariff disadvantage.

𝐅𝐢𝐧𝐚𝐥 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲
Yes, India faces a $2.71B export hit, but China’s loss is nearly 72x bigger. This is India’s moment to step up, capture US market share, and accelerate global trade expansion. The key lies in fast-tracking negotiations and doubling down on competitive advantages.

India’s direct tax collections have shown a strong upward momentum, reflecting the country’s economic resilience and enhanced taxpayer compliance. The latest data reveals significant growth in tax collections across various categories, indicating a robust financial outlook.

Key Highlights

• Gross Direct Tax Collections: Increased by 16.15%, from ₹22,27,214 crore in FY 2023-24 to ₹25,86,947 crore in FY 2024-25.
• Net Direct Tax Collections: Grew by 13.13%, rising from ₹18,86,774 crore to ₹21,26,923 crore.
• Refunds Issued: Saw a sharp rise of 32.51%, from ₹3.47 lakh crore last year to ₹4.60 lakh crore in the current financial year.

Category-Wise Tax Growth

1. Corporate Tax: Increased by 12.54%, from ₹10,98,299 crore in FY 2023-24 to ₹12,40,308 crore in FY 2024-25.
2. Non-Corporate Tax (Including Personal Income Tax): Witnessed a strong growth of 20.47%, from ₹10,91,129 crore to ₹12,90,144 crore.
3. Securities Transaction Tax (STT): Recorded the highest jump of 56%, from ₹34,131 crore to ₹53,095 crore.

Advance Tax Collections

Advance tax payments indicate corporate and individual confidence in future earnings. The figures show a significant increase:

• Total Advance Tax: Up by 14.62%, reaching ₹10,44,700 crore from ₹9,11,482 crore.
• Corporate Advance Tax: Grew by 12.54%, from ₹6,72,592 crore to ₹7,57,000 crore.
• Non-Corporate Advance Tax: Increased by 20.47%, from ₹2,38,890 crore to ₹2,87,700 crore.

Budget vs. Revised Estimates (RE) for FY 2024-25

The government’s revenue projections have been revised based on tax collection trends:

• Total Direct Tax Target: ₹22.37 lakh crore, slightly up from ₹22.07 lakh crore in the Budget Estimates (BE).
• Income Tax Target: Revised upward to ₹12.57 lakh crore from ₹11.87 lakh crore in BE.
• Securities Transaction Tax (STT) Target: Increased significantly to ₹55,000 crore, up from ₹37,000 crore in BE.
• Corporate Tax Target: Revised lower at ₹9.80 lakh crore, compared to ₹10.20 lakh crore in BE.

Final Thoughts

The continued growth in direct tax collections highlights India’s expanding economy, improved tax compliance, and increased taxpayer participation. With strong corporate earnings and rising personal income tax contributions, the government remains on track to meet its fiscal targets. This positive trend underscores India’s financial stability and economic growth trajectory.

The Securities and Exchange Board of India (SEBI) has unveiled a regulatory framework for Specialized Investment Funds (SIF), set to take effect from April 1, 2025. Positioned between Mutual Funds (MFs) and Portfolio Management Services (PMS), SIFs aim to provide greater portfolio flexibility while ensuring regulatory oversight.

What Are Specialized Investment Funds (SIFs)?

SIFs are a newly structured investment vehicle offering high-net-worth individuals and sophisticated investors customized investment strategies with regulatory safeguards. This framework enables investors to go beyond the traditional MF space while maintaining compliance and oversight.

Key Highlights of SIFs

• Who Can Launch? SIFs can be launched by Asset Management Companies (AMCs) with 3+ years of operations and an average AUM of ₹10,000 Cr+, or experienced fund managers with a strong track record.
• Investment Strategies Available: SIFs offer a range of investment strategies, including Equity (Large Cap, Non-Large Cap, Sectoral), Debt, and Hybrid funds with long-short strategies.
• Minimum Investment Requirement: Investors must commit at least ₹10 lakh across all SIFs of an AMC, unless they are Accredited Investors who may be granted exemptions.
• Derivative Exposure: Up to 25% unhedged derivative exposure beyond hedging and rebalancing.
• Subscription & Redemption Flexibility: SIFs can offer daily subscriptions/redemptions or fixed maturity intervals, depending on the scheme’s structure.
• SIPs & STPs: Systematic Investment Plans (SIPs) and Systematic Transfer Plans (STPs) will be permitted post the minimum investment threshold, subject to AMC discretion.
• Distribution & Certification Requirement: Mutual Fund distributors can offer SIFs but must clear the NISM Series-XIII Common Derivatives Certification to qualify.

Risk Factors Associated with SIFs

While SIFs offer greater flexibility and higher potential rewards, they also come with inherent risks:

• Concentration Risk: SIFs often have focused portfolios, increasing exposure to specific sectors or assets.
• Liquidity Risk: Limited redemption frequency may restrict easy access to funds.
• Market Correction Risk: Investors have limited averaging opportunities, making it riskier during market downturns.

Regulatory & Industry Impact

The Association of Mutual Funds in India (AMFI) has been tasked with issuing necessary guidelines by March 31, 2025. Stock exchanges and clearing corporations will also align their regulations accordingly to facilitate smooth operations of SIFs.

Final Thoughts

With the launch of SIFs, SEBI is bridging the gap between Mutual Funds and PMS, providing investors with enhanced investment opportunities. While they come with higher risks, they also present an exciting alternative for those seeking customized, high-growth investment options.

With higher risks come higher potential rewards, making SIFs an ideal choice for sophisticated investors.