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Welcome to the first episode of the
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second season of Beyond the Charts,
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which is a show where we dive into some
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of the most interesting charts from the
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world of economy and finance. Ever since
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we ended the first season, a lot of
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y'all have told us that you loved the
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show and you wanted us to bring it back.
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So, here it is for you. I'm your host,
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Anurag Bans, and this is the first
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episode of this show. See, we're now
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about halfway through 2025. And in about
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the last six months, the global economy
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has seen a big series of shifts. From
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new trade policies and rising debt
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levels in the US to softer inflation in
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India and also shifting investor flows
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across markets, there has been a gradual
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change in the way capital confidence and
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risk are moving around the entire world.
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Now, one of the most important round of
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developments this year came in early
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April when the US announced a new round
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of tariffs. Now, these of course, as you
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might know by now, are taxes on goods
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that are imported into the country. And
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this was not a small adjustment. The
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average US tariff rate went up to 15.8%.
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That is the highest that it has been in
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nearly 90 years. And of course, while
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the final number was lower than the
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initial announcement, it still marks a
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clear break from the kind of trade
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policy that the US has followed in
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recent decades. Now, this shift has
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created a sense of hesitation of sorts
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across the entire economy because when
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trade rules change so sharply,
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businesses and consumers tend to wait
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and watch. Companies also hold backs on
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investments and households pause big
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purchases and needless to say, markets
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become harder to predict. Now, one early
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sign of the slowdown can be seen in
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container traffic between China and the
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US. To give you a sense, the number of
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containers that leave Chinese ports for
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American shores has clearly dropped. And
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while I know that might seem like a
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small operational detail to some of you,
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the truth is that it is often one of the
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first indicators that global trade flows
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are being disrupted. But again, trade is
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not the only concern here. The US has
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also introduced a large new fiscal
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package which is also called the one big
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beautiful bill. This includes both tax
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cuts and spending reductions and it is
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projected to add around 5 trillion US to
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the US national debt over the next
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decade or so. And if those estimates
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play out, the country's debt to GDP
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ratio could reach 129% by as early as
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2034. That would obviously be among the
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highest levels seen in the developed
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world. Anyway, moving on. Geopolitics
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has added another layer of complexity
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here. The tensions between Israel and
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Iran and some recent changes in how the
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US handles economic sanctions has raised
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more questions for global supply chains
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and commodity markets. Interestingly
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though, despite all of these risks,
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markets have stayed fairly calm. In
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fact, S&P 500 went up slightly after the
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midJune flare-ups and oil prices, which
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are often the first to react fell down
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this time around. To give you a sense,
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Brent crude dropped by around 2% and WTI
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by nearly 4%. Now, the reason why I'm
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stressing on this region and why it
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matters so much is because of energy.
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See, Iran holds about 12% of the world's
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oil reserves and it has the second
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largest natural gas reserves globally
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speaking. It also produces large volumes
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of gas and oil. Now, most of that oil,
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which is about 90% to give you a
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reference, is sold to China alone. So
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therefore, any instability that involves
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Iran raises concerns around energy
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prices, trade balances, and also
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diplomatic alignments. But anyway,
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moving on. In the middle of all of this,
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something unexpected has happened. The
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US dollar has weakened significantly.
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See, the dollar index, which measures
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how the US currency is performing
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relative to the others, has fallen by
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over 10% in just 6 months. That, mind
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you, is the steepest first half drop
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since 1973. And what's interesting is
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that this goes against what usually
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happens during global uncertainty. So
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then the obvious question is what is
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causing the dollar to fall. See there is
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no one single reason. It's actually a
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combination of multiple factors. See the
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US dollar had become relatively
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overvalued in the last few years. US
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economic data has not been very strong
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and there have been concerns around
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America's growing debt that have been
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increasing lately. And some countries
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are also now pushing back against the
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dominance of the US dollar, especially
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as trade and sanctions get a little more
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politicized. But moving on, there is
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also something more unusual that's going
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on in the bond markets. See, typically
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when US bond yields rise, which
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basically means that the return you get
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from buying a US government bond goes
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up, then the dollar strengthens. But
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this time around, bond yields have
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actually gone up while the US dollar has
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dropped. Now, that suggests a deeper
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concern over here. investors might be
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starting to look elsewhere for safety
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and stability instead of defaulting to
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the US dollar. That said, let's now move
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ahead and talk about the capital
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markets. See, across the board, the
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picture is fairly mixed here. Some
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segments are recovering, others are
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still cautious. Mergers and acquisitions
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are up by about 25% this year, but that
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increase is being driven by just a few
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large deals. The total number of
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transactions is the lowest in the last
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two decades. And that suggests that
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while large and wellunded companies are
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still fairly active, the smaller ones
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are a lot more hesitant to make moves in
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this uncertain environment. And if you
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talk about IPOs, the story there is very
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similar as well. See, even though total
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equity fundraising is up about 7%, the
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number of new companies going public is
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down by 11%. Basically, more firms are
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choosing to stay private and they are
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raising money through venture capital or
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private credit instead of actually
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listing on public markets. And this
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trend has been building over the last
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few years, mind you. In 2024, the
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average age of companies going public
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was about 14 odd years compared to just
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eight years back in 2004. That's a big
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change in how companies think about
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growth and liquidity. But moving on from
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that as well, but at the very same time,
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bond markets are showing very strong
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activity. Large and financially stable
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companies are raising more money through
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bonds than in almost any previous year
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except 2020, which was during the
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pandemic. Investors basically seem to be
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favoring safety and they are buying
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bonds from companies with solid
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fundamentals. There has also been some
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renewed interest in riskier high yield
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bonds in the last couple of months. But
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overall speaking, the focus has been on
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lower risk options. Generally,
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government bond yields have been moving
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within a very narrow range. The US
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10-year Treasury yield stood at about
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4.47% by miday. The shape of the yield
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curve is also shifting over here.
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Long-term yields are beginning to edge
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past short-term ones once again, which
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is a signal that markets are expecting
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interest rates to fall over the long
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term. Also, the term premium, which is,
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by the way, the extra returns that
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investors demand for holding long-term
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bonds, is also rising over here. And
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that usually is a sign that people are
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starting to worry about future risks,
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like let's say rising inflation or
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government debt, and they want better
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compensation to lock in their money for
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longer periods of time. Now, moving
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ahead from all of this, let's now talk
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about how the stock market has done.
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See, the stock markets have been mostly
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stable. The US markets saw a dip after
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the April tariffs, but have since then
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recovered pretty well. Global markets in
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fact have outperformed US equities so
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far in this year. That is worth noting
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because for the last 15 odd years the US
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has led the world in terms of growth,
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innovation and also investment returns.
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But this year some of that leadership is
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actually showing signs of weakening.
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Foreign investors are becoming more
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cautious about the US. The dollar is not
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gaining during global stress events like
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it used to. and US stock valuations are
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high and of course the country's fiscal
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deficit continues to stay at levels
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usually seen only during crisis and in
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contrast more money is now flowing into
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European and Asian markets than we have
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seen in many years before governments
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are also leaning more on private capital
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to meet their funding needs especially
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in areas like infrastructure clean
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energy and AI or artificial intelligence
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so with public budgets under a lot of
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pressure private investors are now
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suddenly playing a much bigger role
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global private infrastructure assets
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under management are expected to cross
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$2 trillion US by 2028 with the bulk of
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that growth happening in the US and
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Europe. Defense budgets are rising as
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well. European NATO countries are
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finally hitting their target of spending
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2% of GDP on defense. Germany, for
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example, has announced a massive€1
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trillion euro plan for defense and
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infrastructure. Similarly, Japan has
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also increased its defense budget by
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9.4%. Now all of these changes basically
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show us a much larger trend that is
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governments are rethinking their
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priorities in response to a more
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uncertain world. Anyway, now let's move
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on and come to our home country which is
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India. See the Reserve Bank of India
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releases latest financial stability
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report recently in the month of June. If
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you're unfamiliar with it, this is
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basically a bianual report that gives us
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a very comprehensive look at how India's
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financial system is doing which includes
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banks, corporates, households and also
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the others. Now in the forward to this
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report, RBI Governor Sanjay Marotra
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pointed out that the US tariff
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announcements have set off a new kind of
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trade environment globally. This is one
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that is harder to navigate and it may
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keep growth under a lot of pressure. In
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fact, global growth forecasts have been
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revised down by major institutions like
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the IMF and the World Bank. But
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interestingly, India's outlook has
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stayed fairly steady. The economy is
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expected to grow at about 6 1/2% in
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202526, which is about the same as last
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year. That is largely thanks to a strong
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domestic demand, stable macro
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fundamentals and also a reasonably sound
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policy management. Inflation has also
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cooled down. In May, for example,
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consumer inflation dropped to 2.8% which
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to give you a reference is a 6-year low.
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Food inflation came in at about just 1
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and a.5% which gave relief to households
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and also improved consumer sentiment at
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scale. Liquidity in the banking system,
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which was fairly tight earlier this
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year, has also eased in the recent few
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months. The RBI injected 9 1/2 lakh
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crore rupees into the system through
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bond purchases and other tools. It also
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announced a phase reduction in cash
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reserves ratio between September and
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December which will basically unlock
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another about 2 1/2 lakh cr rupes for
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banks to lend and this shift is also
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showing up in the bond market. Now
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short-term interest rates have dropped
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faster than long-term ones and that's
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usually called a bull's steepening of
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the yield curve. It basically suggests
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that markets expect more rate cuts going
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forward. Anyway, one more trend to watch
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out this time around is the shrinking
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gap between the Indian and the US bond
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yields. Now, the difference between the
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10-year government bond yields in these
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two countries is now at a 20-year low.
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That could impact how attractive Indian
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bonds are to foreign investors. Stock
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markets in India have mostly recovered
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after a dip earlier this year, but
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foreign investors have been steadily
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pulling money out. Their share in Indian
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equities is now at about a 10-year low.
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And if you think about emerging markets
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more broadly, they saw about $40 billion
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of foreign outflows in the last quarter
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of 2024, which is the largest quarterly
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outflow ever since COVID 19. But despite
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that, Indian markets have not suffered
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much. You might have noticed and that is
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because domestic institutional
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investors, which are like mutual funds,
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insurance companies, pension funds and
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so on so forth, have stepped in to
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protect the markets. In fact, domestic
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investors now own a larger share of
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Indian equities than foreign investors
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for the first time in many, many years.
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Retail investors are also playing a
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bigger role now, but most of their
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exposure is still in micro cap stocks,
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which are smaller companies that carry a
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lot more risk. Their presence in larger
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and stable stocks is still relatively
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limited. But anyway, valuations are
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another interesting area to keep an eye
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on. They have come down from earlier
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highs, but they still remain expensive
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by historical standards, especially in
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the small cap and midcap space. As of
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March 2025, about twothirds of listed
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stocks were trading above their
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long-term average price to earnings or
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PE ratios. Despite global uncertainties,
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Indian corporates have done reasonably
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okay. Profit margins are holding up even
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while sales growths have slowed down and
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corporate debt levels remain low as
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compared to global peers. And that of
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course gives companies some flexibility
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if profits do come under the pressure in
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the coming months ahead. Anyway, moving
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ahead, India's banking sector continues
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to be in a very strong shape. Bad loan
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ratios have hit multi-deade lows. To
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give you a sense, gross NPA are at 2.3%
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and net NPA are down to 0.5%.
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Capital levels are also at record highs
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of 17.3%. Now these improvements have
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come gradually over the past few years
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which are driven by better regulation,
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improved underwriting and also a cleanup
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of legacy issues. Stress tests also show
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that even under adverse scenarios,
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Indian banks are expected to stay well
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capitalized. Household debt is rising
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but it is still manageable. As of
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December 2024, household debt stood at
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41.9% of GDP. That is up from earlier
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levels but it is still lower than many
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other emerging markets. Now what's
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changing is a composition of that debt.
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A growing share now comes from personal
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loans, credit cards and also consumer
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finance. Now these now account for about
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more than half of household debt and are
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growing faster than home or even farm
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loans for that matter. A good news here
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is that this growth is being driven by
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highrated borrowers. Now these are
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people with strong credit histories. So
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the overall quality remains fairly
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stable. Anyway, finally, the report also
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touches on the rising influence of
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non-bank financial players, which is
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like private equity firms, hedge funds,
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asset managers, and also insurance
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companies. Globally, these firms now
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hold nearly about half of all financial
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assets. But again, they often use a lot
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of leverage, which basically means that
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they can be vulnerable to sudden market
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shocks. And if you talk about India here
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specifically, NBFCs remain healthy
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overall with good capital levels and low
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NPAs. But their loan growth has slowed
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recently largely due to the RBI
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increasing capital requirements on
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certain loan categories. The RBI also
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conducted its systematic risk survey in
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May 2025 and the results show a sharp
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contrast in sentiment. About twothirds
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of respondents say that confidence in
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the global financial system is
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weakening. But more than 90% of them
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felt confident about India's financial
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system. But anyway, that said, they did
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flag some risks. Geopolitical tensions,
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capital outflows and a slowdown in
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global trade, especially exports are
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seen as the top short-term concerns.
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Export heavy sectors like manufacturing,
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MSMES and logistics are considered the
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most vulnerable here. So with all of
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that said and done, while India's
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economy and financial system have held
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up fairly well so far, the broader
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global environment remains fairly
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uncertain and the next few months will
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likely test how really resilient that
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entire stability of our country is.
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That's all we have for this episode.
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We'd love to know what you think about
00:14:06
it and maybe what we can do in the next
00:14:08
episodes to improve. Please do share it
00:14:09
with us in the comment section down
00:14:11
below and we would love to have a chat
00:14:12
with you. Anyway, this is your host
00:14:14
Anurak Bansil signing off for this
00:14:15
episode. I'll see you in the next one.
00:14:17
Take care and goodbye.
