Welcome to our monthly economic and market update! As we enter a new month, here’s a recap of the key economic and market developments in India from February. Let’s get started.
India economy update
- India’s retail inflation eased to a five-month low of 4.31% in January, below expectations, as food price inflation cooled. This increases the likelihood of further rate cuts by the Reserve Bank of India, which already lowered rates for the first time in nearly five years to support slowing economic growth.
- Indian banks’ net interest margins (NIMs) are expected to decline by 10 basis points in FY 2026 due to the Reserve Bank of India’s recent rate cuts, according to Fitch Ratings. However, the RBI’s liquidity easing measures may cushion the decline. Banks’ NIMs, which remained healthy at 3.5% in mid-2024, are projected to gradually revert to the long-term average of 3% amid slower loan growth and lower yields.
- India’s wholesale inflation remained steady at 2.31% year-on-year in January, slightly lower than economists’ expectations of 2.5%, as food and fuel prices moderated. Food inflation eased to 7.47% from 8.89% in December, with vegetable prices rising just 8.35% compared to the previous month’s 28.65% surge. Fuel and power prices declined 2.78%, while manufactured product prices, which make up 64% of the index, rose 2.51%.
- India’s GDP grew 6.2% year-on-year in October-December, supported by rising government and consumer spending, along with a stronger rural economy. However, manufacturing remained weak, and growth was slightly below analyst expectations of 6.3%. The government revised its full-year 2023-24 GDP growth estimate sharply upward to 9.2% from 8.2%, signaling optimism for the coming quarters.
India stock market update
February was a tough month for India’s markets. The BSE SENSEX saw a sharp decline of 5.56%, closing at ₹73,192.35, while the NIFTY 50 dropped by 5.88%, ending at ₹22,126.35. Persistent economic challenges and investor uncertainty contributed to the significant losses across both major indices.
- India’s GlaxoSmithKline Pharmaceuticals reported a 35% rise in adjusted third-quarter profit, driven by strong demand for its respiratory drugs and antibiotic Augmentin. Revenue grew 18% to 9.49 billion rupees as the company benefited from market share gains in key products, including Nucala, Trelegy, and the shingles vaccine Shingrix.
- Indian pharmaceutical stocks dropped as President Trump announced plans to impose tariffs of 25% or more on pharma imports, sparking investor concerns given the sector’s heavy reliance on U.S. exports. The NIPHARM index fell 2% to a seven-month low, with major players like Sun Pharma, Dr. Reddy, Aurobindo Pharma, and Cipla seeing declines. Indian drugmakers exported $8.73 billion worth of pharmaceuticals to the U.S. in FY24, making up 31% of total exports.
- Swiggy is investing up to $115 million in its supply chain unit Scootsy to support the expansion of its quick-commerce business, Instamart. This follows a $192 million investment in December, reinforcing its strategy to compete with Zomato’s Blinkit in the fast-growing 10-minute delivery market
- UltraTech Cement is investing $206 million over two years to enter the wires and cables business, expanding its presence in construction materials. The new venture, part of its building products division, will establish a plant by December 2026 to tap into a market that grew at a 13% CAGR from 2019-2024.
Indian top gainer and top loser stocks for February
Summary
Overall, India’s retail inflation fell to a five-month low of 4.31% in January, raising expectations of further RBI rate cuts. Wholesale inflation remained steady at 2.31%, with easing food and fuel prices. GDP grew 6.2% in Q3, driven by consumer spending and a resilient rural economy, though manufacturing remained weak. Markets struggled in February, with the BSE SENSEX down 5.56% and NIFTY 50 losing 5.88%. GSK Pharma saw a 35% profit surge, while Indian pharma stocks slumped amid Trump’s proposed U.S. import tariffs. Swiggy and UltraTech Cement made major expansion investments, targeting rapid commerce and the construction materials sector.
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