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Deepak Pawar – Navigating Uncertainty: How the Iran-Israel War Threatens India’s Trade Flows

Effects of the Iran-Israel War Navigating Uncertainty: How the Iran-Israel War Threatens India’s Trade Flows Synopsis: The ongoing Iran-Israel conflict poses significant risks to India’s trade, especially due to rising crude oil prices, disruptions in shipping routes, and increased insurance and freight costs. As tensions between Iran and Israel escalate, the economic tremors are being felt far beyond the Middle East. For India—deeply integrated into global trade and heavily reliant on energy and fertilizer imports—the conflict poses serious macroeconomic and sectoral challenges. Disruptions in shipping lanes, rising freight costs, and supply chain vulnerabilities are already beginning to strain key industries. Trade Disruption and Export Exposure In FY2025, India exported goods worth $1.24 billion to Iran and $2.15 billion to Israel, while importing $441.9 million and $1.61 billion from these countries, respectively. However, the broader threat lies in the disruption of key maritime routes. The Strait of Hormuz and the Red Sea—which together handle nearly 80% of India’s merchandise trade with Europe and a significant portion of trade with the US—are now under threat. These regions account for 34% of India’s total exports. Map of Strait of Hormuz: Wikipedia Source: commerce.gov.in Source: Vasuki India – Strategic Research Risk to Indian Export War risk premiums for containers have surged from $50–$200 to $200–$400. Transit times via the Cape of Good Hope are increasing by 15–20 days, raising freight and insurance costs by a similar margin. India’s exports to Israel have already dropped from $4.5 billion in FY24 to $2.1 billion in FY25, while imports fell from $2.0 billion to $1.6 billion. Sectoral Impact Several of India’s high-performing export sectors are particularly vulnerable: Pharmaceuticals, which rely on stable access to Middle Eastern and North African markets. Textiles and home furnishings, especially to Israel, where margins are 10–15% higher than in the US. Gems and jewellery, electronics, and engineering goods, which face both demand-side risks and supply-side shocks—particularly from disruptions in Israel’s rough diamond exports. Basmati rice exports to Iran, India’s third-largest buyer, are expected to decline. In FY25, India exported ₹6,374 crore worth of Basmati rice to Iran, accounting for 12.6% of total Basmati exports. Fertilizer Sector: A Fragile Supply Chain India’s fertilizer sector is especially exposed due to Iran-Israel war. Nitrogen fertilizers like urea depend on ammonia, derived from natural gas—60% of production costs stem from this input. Phosphorus fertilizers like Diammonium Phosphate (DAP) require phosphate rock and sulphur, while potassium fertilizers rely on potash ore. Global fertilizer Supply: The Middle East and North Africa (MENA) region supplies over 30% of the world’s nitrogen fertilizers. Iran exports over 16 million tonnes of urea annually. Morocco holds 70% of global phosphate rock reserves. Russia and Belarus account for nearly 40% of global potash capacity. Any disruption in these supply chains—whether from sanctions, shipping delays, or conflict escalation—could trigger a lagged price shock. Within 1.5 to 2 months, fertilizer prices may rise sharply. Farmers, facing higher input costs, may reduce usage, leading to lower agricultural yields. Prices of Di-ammonium Phosphate (DAP) and Urea USD/T on June 17, 2025 Ripple Effects in India The Indian government may be forced to increase fertilizer subsidies, straining the fiscal deficit. If subsidies are not scaled up, food inflation could rise, especially in rural areas. The war could lead to rise in Energy Prices and Inflationary Pressure. The conflict has already pushed Brent crude oil prices to $76 per barrel, with a 12% surge since the escalation began. JPMorgan warns that prices could reach $120 per barrel in a worst-case scenario. A $10 increase in crude oil raises India’s oil import bill by ~ $12–13 billion annually, widening the current account deficit by ~ 0.3% of GDP. The Indian rupee has already weakened to ~ ₹86 per USD, adding to import costs. Higher oil prices could also impact sectors like paints, tyres, cement, and chemicals, which rely on crude derivatives.

Deepak Pawar – India’s 2025 Monsoon Outlook: Foodgrain Output, Sugar Sector Stability, and Evolving Fertilizer Trends

Monsoon Outlook 2025 India’s 2025 Monsoon Outlook: Foodgrain Output, Sugar Sector Stability, and Evolving Fertilizer Trends India is expected to receive above-average rainfall in 2025, with projections at 105% of the long-term average of 868mm. The absence of El Niño conditions and the potential development of La Niña later in the season are contributing to the positive monsoon outlook. While most regions are likely to experience above-normal rainfall, certain areas in northwest, northeast, and southern Peninsular. For more details, please click here .

Dhruv Joglekar – INDIA’S PASSIVE FPI OUTFLOWS MAY SOON BOTTOM AS USDINR NEARS 88-89

India’s Passive FPI Outflows May Soon Bottom as USDINR Nears 88-89 INDIA’S PASSIVE FPI OUTFLOWS MAY SOON BOTTOM AS USDINR NEARS 88-89 Summary Passive Foreign Portfolio Investment (“FPI”) outflows from India may soon turn as USDINR moves towards 88-89. Historical trends show a median depreciation of 6.6% in trough-to-peak cycles over the last decade, with an average of 7.9%. If this pattern holds, the rupee could reach 88-89 by Q1 FY26, possibly reversing passive FPI outflows. Historical patterns indicate that major depreciations in USDINR tend to follow phases of appreciation. The most notable depreciation in recent history occurred during the 2013-14 Taper Tantrum when the currency fell by ~16% within 3-4 months after FPI flows peaked at $14.8 billion. A similar decline was seen in 2018 due to trade war concerns, a 100-bps Fed rate hike, and domestic uncertainties linked to GST implementation, resulting in $25 billion in FPI outflows. Given past trends, if current factors affecting the exchange rate persist, USDINR could rise to 88-89 by April-May FY26 based on median bottom-to-peak moves observed in previous years. Cycles of USDINR and FPI flows show average peak depreciation of 8.3% The US Economy and FPI Inflows: A Surprising Correlation Contrary to common belief, a stronger U.S. economy does not necessarily drive capital outflows from India. Analysis of the Citi U.S. Economic Surprise Index (CESI) and India’s net FII equity flows since 2014 suggests a 25% positive correlation. Additionally, econometric modeling indicates that a 1% positive surprise in U.S. economic data has historically driven an inflow of approximately $82 million into Indian equities, with a lag of around one month. Growth Surprises in the US are Generally Positive for India Flows Correlation between US 10-Year Bond Yields and Indian (or Emerging) Markets Historical data suggests a strong inverse correlation between U.S. 10-year bond yields and emerging market equities, including India. These asset classes often move in opposite directions, with rising U.S. bond yields drawing capital away from riskier markets. When the U.S. 10-year yield exceeds 4.3% to 4.4%, it often marks an inflection point where investors reallocate funds into U.S. bonds. In September 2024, the U.S. 10-year yield was at 3.6%, but it has since risen to 4.6%. This surge has coincided with significant capital flows into U.S. assets, strengthening the dollar and contributing to large-scale FII outflows from India. A 4.5% risk-free return in U.S. dollars presents an attractive alternative, particularly as emerging markets continue to trade at elevated valuations. US 10-year bond yields and Indian (or emerging) markets have high negative correlation (Source: Vasuki Research) Source: Vasuki Research Conclusion: Volatility Ahead, but Structural Strength Remains Although short-term market conditions remain uncertain, India’s long-term fundamentals continue to provide a solid foundation. Fiscal consolidation efforts, steady forex reserves, and resilient domestic flows support economic stability. While USDINR may weaken to 88-89, the expected reversal in passive FPI flows will be a critical development for investors tracking the evolving macroeconomic environment. For more information, reach out to us at research@vasukiindia.com. Disclaimer This article is published for informational purposes only and does not constitute investment advice or analysis. The information presented has been sourced from public domains and has not been independently verified. Vasuki Group makes no representations or warranties regarding the accuracy, completeness, timeliness, or reliability of the content. Neither Vasuki Group nor its affiliates, directors, employees, or representatives shall be liable for any errors, omissions, or reliance on the information provided. This article does not constitute an offer, solicitation, or recommendation for any investment, securities transaction, or contractual engagement. Readers should conduct their own due diligence before making any financial decisions. Any views expressed are those of the author and do not necessarily reflect the opinions of Vasuki Group. Further, Vasuki Group may hold or take positions in the market that differ from the views expressed in this article. All rights reserved. Vasuki Group reserves the right to update or modify this article at its discretion.

Deepak Pawar – Agriculture Scenario in India and Future outlook

Agriculture Scenario in India and Future outlook El Niño and La Niña are climate patterns that affect the weather globally. El Niño refers to warmer ocean temperatures in the central-east equatorial Pacific, leading to various impacts like increased flooding and changes in marine life. On the other hand, La Niña involves cooler ocean temperatures in the same region, leading to effects like droughts and heavy rains in different parts of the world. India, along with asian countries faces low and scattered monsoon in El Niño and abundant to heavy rainfall in La Niña. Historical Impact of El-Niño: Past Challenges and Resilience In the past, El-Niño has caused difficulties for farming in India. It led to problems like less rain, affecting crops like rice and sugarcane. Historical data shows that during El-Niño events, agricultural production in India faced setbacks. Crops like rice and sugarcane were particularly impacted by El-Niño. Current Scenario: Facing Water Scarcity and Crop Challenges Currently Western, Central, and Southern regions in India are experiencing water scarcity which is affecting crops such as sugarcane and off-season plantations. Farmers are working hard to adapt to these conditions and find ways to sustain their crops. Water reservoir levels in many regions are lower than previous year as well as long term average. Water scarcity is significantly impacting regions like Northen, Eastern, and Southern India. However, Central region water reserves are at 10 year average while Western India has water availability at levels better than 10 year average but lower than last year. Sowing in Sugarcane, vegetables and pulses are facing challenges due to the scarcity of water. Future outlook: Anticipating Better Monsoon and Agricultural Growth According to initial forecasts by Sky met & IMD, India is likely to witness La Niña phenomenon i.e. return of normal monsoon 2024. The expectation of better rainfall brings optimism for increased agricultural production & fertilizer usage. This positive outlook signals a potential resurgence in agricultural productivity. Agriculture theme can be played in stock markets through sub segments like Seeds, fertilizers, Agrochemicals, Agri equipment’s manufactures & rural consumer products producers. Chart data source:India Meteorological Department Ministry Of Earth Sciences Government Of IndiaReserve Bank of IndiaSkymet Weather

Daljeet Singh Kohli explains why he is overweight on metals

Daljeet Singh Kohli explains why he is overweight on metals Daljeet Singh Kohli to ET Now – featured on 18th Mar, 2024 “Right now, we believe there is a lot of potential there mainly because valuation-wise they are not obscenely high. Second, the way the Indian government is putting focus on infrastructure development and especially after the elections, we expect a lot more push coming on to the infrastructure, so the demand from our side will remain very strong and currency, local as well as international, is in favour. All these factors make a conducive environment for metal stocks and therefore we are exposed to them.” One section of the market believes that the US economy may not be doing that badly. The macro data from China is also supportive. So, metal is the place to be. They are beaten down. There is also a view that if the slowdown continues in these two economies, this metal long trade may be very short lived. Do you believe in this trade or is it just a point A to point B and not worth making it a large part of the portfolio yet?   See, we are right now very much overweight on metals. As of now, almost 8% to 10% of our portfolio is exposed to metals and normally metals is a technical call. So, metal is never a three-year, five-year lock-in story that you buy and forget and your next generation will look at it like that. We do not buy metal stock like that because there are so many things which work. There are so many moving parts there. Either it is global macros, it is local macros, then company specific issues. So, metals normally are a trading opportunity only and we have also taken that view. Right now, we believe there is a lot of potential there mainly because one is that valuation-wise they are not obscenely high. Second, the way the Indian government is putting focus on infrastructure development and especially after the elections, we expect a lot more push coming on to the infrastructure, so the demand from our side will remain very strong and currency, local as well as international, is in favour. All these factors make a conducive environment for metal stocks and therefore we are exposed to them.https://youtu.be/F0PA0rXotOw   I want to draw your attention to Reliance Industries because even in the recovery that played out post Wednesday, Reliance had a big contribution. What do you think is fuelling the move on Reliance? This is the rotation towards large caps basically. If you have to take money out and there is so much talk about froth being built up in various segments. So, if the institutions are forced to or if they have to get out of certain smaller and mid stocks, then where does that money go? The natural progression is that it has to go to some largecap and within the largecap, probably Reliance is the first choice because it is valuation-wise not very costly. There are a lot of trigger points for the stock to perform. After quite a few months of consolidation, the stock had come out of that phase and started moving to the new highs. So, normally, people would want to go with a stronger stock when they are rotating out of some stocks and especially locking out their profit from those stocks. It is just that rotation which is happening. Trigger points for Reliance remain as it is. The new energy initiatives that they are taking, is a three-four years kind of call. It is not immediate that the profitability will start flowing in, but these days just a hint is enough. Semiconductor stocks are trading at 100 multiples. So yes. At least these guys are spending Rs 75,000 crore on new energy. The market is willing to give them that benefit.   How would you play the capex theme right now? What are your favourite capital goods stocks or engineering ones that you have in your portfolio? We are adding some of them. As of now, I do not think we have any capex stock right now. Infrastructure, we have added two-three months back, some road project companies and those we have added. But machinery or cap goods per se, now we are evaluating three-four ideas there. Basically, we tend to go to the mid-end, the smaller ones, instead of just going to the L&Ts of the world and we try to find the niche areas. So, I think there are a couple of ideas which we are working on, maybe in the next one month or so we will be adding some.   What about hospital stocks? There is the entire story brewing on how treatments would be regulated and it will be at par with the public sector hospitals. The entire space went through a correction and some of them started trading at 60-70-time one-year forward, still way off the mark from recent peaks. Would you be comfortable getting back there? I am very bullish on the sector as such because this is a place where we see a lot of potential for many years to go. We have such a huge population, penetration levels are so low and there is a huge scope for expansion for all these companies. Now of course you have to be mindful of valuations. Incidentally, in the last two-three years this sector has seen a lot of PE investments, a lot of private investments coming in which have just inflated the valuation to a very large extent. So, probably this Supreme Court ruling actually become a trigger point for people to take some profit out and bring back some sanity in the valuation. I think still valuations are on the frothy side. So, we will have to be very choosy amongst all these stocks. I am very bullish as I said on the sector, but one has to be very choosy while selecting the stock where at least some kind of

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