India’s retail inflation has reached an impressive low of 1.54 percent in September, the lowest level observed in eight years. This figure is significantly beneath the Reserve Bank of India’s tolerance range of 2-6 percent, prompting speculation on its potential impact on interest rate decisions at the upcoming December monetary policy meeting.
Today’s newsletter highlights the term “diaspora,” focusing on the Indian watchmaker Titan, which is broadening its selection of luxury timepieces to appeal not just to the Indian market but also to international consumers beyond the diaspora. This expansion comes at an opportune time, as India’s stock market regulator works to facilitate investment by non-resident Indians (NRIs) in domestic equities.
The Securities and Exchange Board of India (Sebi) is actively seeking ways to simplify the know-your-customer (KYC) process for NRIs, allowing them to invest in Indian stocks without the necessity of returning to India to complete the required paperwork. Sebi chair Tuhin Kanta Pandey emphasized that improving accessibility for overseas investors is an “urgent goal.” Historically, regulations mandated substantial paperwork and, in many cases, in-person verification for NRIs wishing to invest. These measures, originally aimed at preventing money laundering, are now being reevaluated to leverage technology in enhancing accessibility through the Aadhaar digital identification system.
This initiative is critical as the Indian stock market faces a downturn in both local and foreign investments. With a diaspora of around 35 million sending home remittances totaling $135 billion—an impressive figure that leads the global rankings—redirecting a portion of these funds into Indian stocks could bolster market activity, particularly as many such investments would likely be long-term.
Despite growing interest among resident Indians in stock investments—previously overshadowed by a preference for lower-risk bank deposits—current participation remains limited, with less than 10 percent of households engaged in the securities market. Most residents prefer mutual funds, although inflows into equity funds have declined by 9 percent in September amid a sluggish market. The outflow situation for foreign portfolio investors is particularly dire, with a record $2.7 billion withdrawn over the past month.
While Sebi’s efforts may pave the way for increased NRI investments, the attractiveness of the Indian market remains a pivotal factor in this equation. Current market performance shows benchmark indices either flat or declining, raising questions about the market’s appeal to potential foreign investors. Investor sentiment regarding the health of the Indian economy in the upcoming fiscal third quarter will be crucial in determining future investment flows.
In parallel, Titan is making strides in the luxury watch sector, aiming to enhance its global presence. The launch of the Nebula Jalsa, a $46,000 mechanical watch featuring an in-house tourbillon movement and a meticulously hand-painted dial, marks Titan’s significant shift towards high-end products. Traditionally recognized for producing robust, battery-operated quartz watches, Titan has seen its mechanical watch production skyrocket from 3,000 units in April to about 500 daily by September, totaling an output of 11,000 mechanical watches monthly.
Titan confronts challenges in quality assurance for its luxury timepieces. Currently, its mechanical watches have an accuracy range of -10 to +30 seconds a day, whereas Swiss counterparts like Rolex offer much tighter tolerances. Despite this hurdle, Titan remains committed to refining both design and technology. The Helios division, responsible for luxury watches, has experienced substantial growth, reportedly advancing at a quarterly rate of 30-35 percent.
Titan’s expansion into international markets aligns with its broader strategy, which includes entering the jewelry sector more aggressively, exemplified by its acquisition of a majority stake in UAE-based Damas. This move, as articulated by managing director C K Venkataraman, aims to diversify its customer base beyond the traditional Indian diaspora.
As global market dynamics shift and export tariffs from India rise, Titan seeks to explore manufacturing opportunities in the Gulf region for exports to the US, suggesting that the brand may become a notable player in the realm of global luxury.
As India prepares for a significant series of initial public offerings (IPOs) this month, including substantial listings from Tata Capital and LG Electronics, the potential shifts in investment strategies and market participation are closely watched by economic analysts and investors alike.
