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MFs' Nifty 50 Allocation Falls to 21-Year Low in Q2

BROADER BETS. Exposure slips below 50% as funds widen portfolio beyond top stocks

Akshata Gorde

Mumbai

Domestic mutual funds' allocation to Nifty 50 stocks fell below 50 per cent for the first time in 21 years in the September quarter, even as they increased exposure to other relatively large and mid-cap companies, amid stronger returns from the wider market.

The 50 benchmark stocks accounted for 49.4 per cent of mutual funds' holdings in NSE-listed equities, down from 51.4 per cent in June and a peak of 63 per cent in December 2019, according to the National Stock Exchange's India Ownership Tracker. The allocation had recovered during 2025 as large-cap stocks held up relatively better, before falling again this year.

HIGHER EXPOSURE

Yet, mutual funds increased their exposure to the largest 10 per cent of NSE-listed companies by market capitalisation by 4.2 percentage points to 87.5 per cent. Within this group, their allocation to companies outside the Nifty 50 rose by 6.1 percentage points, largely reflecting higher exposure to mid-cap companies, the NSE said.

Their combined allocation to the next two market-cap groups, comprising mainly small- and micro-cap stocks, declined by 3.1 percentage points to 11.7 per cent.

Atul Singhal, Founder and CEO of Scripbox, said foreign investors pulled about $65 billion out over two years, mostly from large-caps, while $3 billion a month of SIP money is going into funds that can invest beyond the index.

"The money going to large companies outside the Nifty 50 is following earnings. A lot of today's growth sits just below the index, and several large recent listings joined the top 10 per cent before they could join the Nifty 50," Singhal said.

The Nifty 50 delivered annualised returns of 4.8 per cent over the three years ended September compared with 13 per cent for the Nifty Midcap 150 and 13.3 per cent for the Nifty Smallcap 250. ICRA Analytics' September screener showed average annualised three-year returns of 14.22 per cent for mid-cap funds and 14.49 per cent for small-cap schemes, against 8.05 per cent for large-cap funds.

HIGH-GROWTH HUNT

According to the latest data of the Association of Mutual Funds in India, small-cap funds attracted ₹19,039 crore and mid-cap schemes ₹7,835 crore in September, together accounting for about 44 per cent of the ₹38,307 crore net inflows into equity schemes. Large-cap funds received ₹1,859 crore.

ICRA attributed the sustained interest in these categories to regular investing and expectations of long-term growth, while cautioning that elevated valuations could make future returns more dependent on corporate earnings.

Even with the falling portfolio weight, the ownership of mutual funds in Nifty 50 companies' market capitalisation has risen to a record 14.8 per cent in September, marking the 13th consecutive quarterly increase. Overall, institutional allocation to the index fell to a record low 54.6 per cent, with foreign portfolio investors' allocation declining to 56.2 per cent. Fund managers expect the broadening to continue with a focus on earnings and valuations, rather than index allocations.

After London & Amsterdam, Arvind to set up studio in US

Avinash Nair

Ahmedabad

After setting up design studios in London and Amsterdam, Gujarat-based textile firm Arvind is conceptualising a third international design centre in the US. The company is looking to strengthen its global innovation capabilities and get closer to customers in key markets.

The proposed studio will add to its network of design and technical talent across major international markets, helping it sharpen product development, innovation and customer engagement, Vice-Chairman Punit Lalbhai said. "Our Amsterdam and London studios with top-quality design and technical talent, and being closer to customers, is going to make a difference going forward," Lalbhai told investors recently.

The expansion comes as Arvind looks to move beyond its traditional strength in fabric manufacturing and build a stronger position in higher-value, vertically integrated garmenting, while responding to changing sourcing preferences among international brands.

FTA ADVANTAGE

The company is also seeing increased interest from global customers in sourcing from India, following the implementation of the India-UK FTA. "Everybody is travelling to India to see how they can move some of their business here and de-risk their exposure to some of their highly indexed geographies," Lalbhai said.

Arvind expects the initial benefits of the FTA to start reflecting in business in the first half of Q4, with UK business expected to be significantly higher next year. The opportunity is likely to be concentrated more in finished garments than fabric

IBC Rescue rests on 'clean slate'

M.S. Sahoo and Rupesh Choudhary

In the case of IBC resolutions, the government has pursued pre-CIRP liabilities, despite the law's commitment to a clean slate

On September 18, 2026, the Calcutta High Court directed the Income Tax Department to refund the amount it had adjusted against pre-CIRP (corporate insolvency resolution process) tax demands from a post-CIRP refund due to UltraTech Nathdwara Cement Ltd (Ultra). It also restrained the Department from initiating reassessment or other proceedings to recover pre-CIRP dues. In this case, the CIRP of Binani Cements Ltd (Binani) commenced on July 25, 2017. The National Company Law Appellate Tribunal approved the resolution plan on November 14, 2018, and the Supreme Court dismissed the challenge within five days. The resolution applicant took over on November 20, 2018, the company was renamed Ultra on December 13, 2018. The outcome was remarkable. Financial creditors recovered 100 per cent of their admitted claims of ₹16,469 crore. The resolution value exceeded three times the liquidation value. The Insolvency and Bankruptcy Code (IBC) rescued a distressed business and maximised its value. Yet government departments continued pursuing pre-CIRP liabilities, forcing the company to defend its clean slate in court.

The Central GST Department raised demands for pre-CIRP tax liabilities and interest. The Rajasthan High Court quashed the demands. The Customs Department sought to continue a pending appeal concerning pre-CIRP liabilities, the Gujarat High Court abated the appeal. The Rajasthan Government's Commercial Taxes Department refused to refund statutory pre-deposits against disputed VAT demands and amounts deposited under protest against disputed sales-tax demands. The Rajasthan High Court directed refunds, with applicable interest, in both cases. The State's Mines and Petroleum Department raised demands for contributions to the District Mineral Foundation under the Mines and Minerals (Development and Regulation) Act, 1957. The Rajasthan High Court set aside those demands.

These disputes concern different taxes, deposits and statutory demands, but all relate to pre-CIRP dues. The authorities had opportunities to submit claims during insolvency, some did so and contested the resolution outcome up to the Supreme Court. Yet departments pursued the underlying liabilities under their respective laws. The High Courts reiterated the settled legal position and held the demands arbitrary and illegal. Such litigation wasted public money, judicial time and business resources.

Section 31 (1) makes an approved resolution plan binding on the Central Government, State Governments and local authorities. The Supreme Court has repeatedly held that claims not forming part of an approved resolution plan stand extinguished and cannot subsequently be pursued against the successful resolution applicant. A business cannot be rescued if its new owner remains uncertain about its past liabilities. The Government itself acknowledged this principle.

On July 29, 2019, the Finance Minister assured Parliament that the IBC would prevail in the event of inconsistency with other laws and that the Government would make no further claims post-resolution. Yet, Ultra's experience reveals a persistent gap between the law's promise and its implementation by revenue departments. If departments can reopen extinguished claims years after resolution, the clean slate promise becomes illusory.

Applicants cannot reliably assess the liabilities they are taking on. They may lower their offers to account for endless government litigation or avoid rescuing businesses altogether. Creditor recoveries then fall, fewer distressed businesses are rescued, and investment, employment and productive capacity suffer. The state spends money pursuing unenforceable claims while risking the economic value the IBC was designed to preserve.

Pursue Legitimate Dues

The alternative is not to abandon public revenue, but to pursue legitimate dues in time. The IBC gives the government a mechanism to do so, just as it has helped operational and financial creditors. When a company defaults on an operational debt owed to the Government, the appropriate authority can initiate insolvency proceedings. The prospect of admission can prompt a debtor to settle its dues, avoiding formal proceedings. Government data indicate that 30,000 insolvency applications were withdrawn before admission. Operational creditors filed many, and withdrawals often followed payment. This illustrates how the credible prospect of insolvency can induce payment. Financial creditors have benefited from the IBC's resolution framework. The gross non-performing asset ratio of scheduled commercial banks fell from about 11 per cent in 2018 to below 2 per cent by 2025. The IBC was not the sole cause, but its contribution to resolving stressed assets forms part of the broader recovery experience.

The Central and State Governments should issue binding instructions requiring every revenue department to act as a diligent creditor, before and during insolvency. First, identify and pursue legitimate dues promptly. Departments must maintain updated accounts and reconcile disputed and undisputed amounts, and crystallise liabilities as early as the law permits. They should identify defaults, issue required demand notices, and initiate insolvency proceedings where legally justified. They must not leave claims unquantified or un-pursued until the debtor enters CIRP.

Second, participate effectively once insolvency begins. Departments must submit their claims within the prescribed process, provide supporting records, respond to queries, and participate in proceedings. Where a claim is rejected, a resolution plan is challenged, or an adverse decision is made, they should assess promptly whether a challenge is warranted and use the remedies available under the IBC. Once the plan becomes binding, departments must respect its finality. Persistent disregard of settled law should attract institutional accountability, without penalising officials merely because a court rules against them.

The choice is clear: the Government can continue spending public money pursuing extinguished claims, undermining the business rescue, or establish the records, procedures, and accountability needed to secure legitimate public dues before and during insolvency. The clean-slate principle does not require the State to forgo legitimate revenue; it requires the State to pursue it within the statutory framework and respect the finality of resolution.

The Government must stop litigating against the clean slate and start using the IBC to its own advantage, rescuing distressed businesses while protecting public revenue.

The writers are, respectively, Emeritus Fellow, Insolvency Law Academy, and Researcher, Sahoo Regulatory Chambers.

Overview of the Scandal

• Jensen Huang's Personal and Professional Blow: Nvidia CEO Jensen Huang informed his staff that he had been unfaithful to his wife with Alice Huang, a Chinese citizen formerly with Singapore-based data centre company Megaspeed and allegedly linked to China’s Ministry of State Security.

• Immediate Fallout: The revelation triggered an internal board investigation, a shareholder lawsuit in San Jose, a single-day loss of about $190 billion in market value, and comments from President Trump that the FBI is examining the matter.

• The Real Winners: The scandal primarily benefits U.S. national security advocates who spent years trying to close loopholes in chip controls against China.

Key Loopholes and Policy Shifts

• The Remote-Access Bypass: Huang was the most effective opponent of U.S. chip export controls, successfully pushing to get the H200 chip approved for sale to China earlier in the year and resisting restrictions on remote access (allowing labs in China to rent compute time on chips stationed in Southeast Asian data centres like Megaspeed).

• Exposed Front Companies: Around the same time, The New York Times reported that many approved Chinese buyers for H200 chips operated out of empty rooms or acted as fronts for sanctioned entities and Chinese military contractors.

• Legislative Crackdown: The scandal acts as a political "detonator," making it much easier for Congress to pass tighter restrictions—such as remote-access rules under the Overwatch Act, amendments to the MATCH Act, and the Chip Security Act—via the defense budget.

• Nvidia Board's Precedent: Nvidia's board formally acknowledged that American national and economic security comes before the company and its shareholders.

Repercussions for India

• Impact on Indian AI Firms: If renting chips remotely in Singapore and Malaysia requires strict licensing, Indian AI companies utilizing this model (and domestic data centres hoping to offer similar services) will be heavily impacted.

• Vulnerability of India's AI Strategy: India's national AI strategy relies on continued Nvidia shipments. However, a company under strict U.S. national security oversight will send its chips where Washington dictates rather than to the highest bidder.

• Conclusion: While Huang retains the backing of his board and President Trump, the arguments and loopholes he spent two years defending are officially closing.

Overview of the Global Oil Drop

• Democratic Mid-Term Victory: Following the Democratic takeover of Congress in the US mid-term elections, global crude prices retreated sharply below the $100 mark, with Brent dipping toward $93 and West Texas Intermediate (WTI) hovering near $85 a barrel.

• Constrained White House: Markets priced in a more constrained White House facing legislative resistance to military escalation in the Middle East and unilateral tariff wars.

Key Strategic Questions for India

• Contract Strategy: Should India deepen long-term term-contracts for Russian crude, or maintain its flexible, month-by-month spot buying approach now that secondary US sanctions pressure may soften?

• OPEC+ Response: How will OPEC+ respond to falling prices, and will India face supply cuts designed to artificially prop up prices?

Policy & Economic Implications for India

• Fiscal Prudence over Populism: Indian policymakers may resist the populist temptation to slash domestic fuel excise duties, holding retail petrol and diesel prices steady instead to allow public sector oil marketing companies to repair battered balance sheets.

• Geopolitical & Supply Risks: Even with temporary transit exemptions on the Strait of Hormuz, punitive war-risk insurance premiums and naval blockades continue to choke supply chains. India must maintain naval escorts in the Gulf of Oman and rely on overland pipelines through Saudi Arabia and the UAE.

• Reserves & Infrastructure: India should seize the price dip to top off its Strategic Petroleum Reserves and fast-track the four-million-tonne Chandikhol facility to insulate against future shocks.

Expert Insights on Crude Dynamics

• Lauri Myllyvirta (CREA): Believes Democratic control is bearish for oil prices due to a stronger track record on Russia sanctions and restricted ability for Trump to issue waivers. He notes that India's seaborne oil imports in October were the highest on record, highlighting India's vulnerability.

• Ellen R. Wald (Transversal Consulting): Suggests India stick to a month-to-month approach on Russian crude since it remains unclear if Trump will intensify sanctions to force negotiations.

• OPEC Outlook: Traders and analysts expect OPEC to defend an $85–$95 price floor by pausing planned output hikes, though sluggish global demand will keep them from imposing draconian cuts.

Tamil Nadu witnessed a steady deterioration in air quality during the Deepavali celebrations over the three-year period from 2024 to 2026, according to a comparative assessment released by the Tamil Nadu Pollution Control Board (TNPCB).

Key highlights from the TNPCB report include:

• Air Quality Index (AQI): The average AQI across 39 monitoring locations spanning 17 districts rose nearly 18% overall, moving from 143.46 in 2024 to 161.69 in 2025, and further to 168.97 in 2026. This marks the third consecutive year of rising pollution levels.

• Annual Growth in Pollution: The increase was particularly sharp in 2025, when the average AQI jumped by 12.7% over the previous year, followed by another 4.5% increase in 2026.

• Regional Disparities: Out of the 39 locations monitored in 2026, 25 recorded an increase in AQI compared to 2025, while 14 registered an improvement. Chennai continued to be among the worst-affected areas, with multiple neighborhoods displaying consistent deterioration over the three years.

• Ambient Noise Levels: Average noise levels on Deepavali day also escalated, climbing from 73.94 decibels (dB(A)) in 2024 to 75.70 in 2025 and 76.73 in 2026.

• Contributing Factors: The TNPCB attributed the overall surge in air and noise pollution to firecrackers combined with adverse meteorological conditions, such as wind speed, direction, and atmospheric stability