India’s Financial and Tech Landscape: Key Updates – May 2025

Financial Sector Update: SEBI’s Bold Move to Attract Foreign Investors

In a landmark move aimed at liberalizing the debt market, the Securities and Exchange Board of India (SEBI) has proposed significant relaxations in compliance norms for foreign portfolio investors (FPIs) focused solely on Indian government bonds.

These proposals include:

• Eliminating the requirement for these investors to disclose information about their investor groups.

• Allowing both resident and non-resident Indians, as well as Overseas Citizens of India (OCIs), to contribute to such funds.

The move is strategically aligned with India’s inclusion in global bond indices, a development that is expected to bring substantial foreign inflows into government securities. By easing these restrictions, SEBI aims to improve the attractiveness of India’s sovereign bond market and ensure deeper participation from global investors.

However, the equity markets have shown a mixed response. While indices like the Nifty and Sensex had previously recorded some of their best performances in recent years, they have recently faced corrections. According to analysts at CLSA, India’s status as a "safe haven" for equity investment could be tested due to stabilizing geopolitical tensions and evolving investor priorities. As global capital becomes more selective, India may need to lean on structural reforms and corporate earnings momentum to sustain investor interest.

Technology Sector: AI Investments and Data Infrastructure Expansion

India’s technology sector continues to draw strong international interest, particularly in areas like artificial intelligence (AI), data centers, and enterprise software.

One notable development is the launch of a $100 million fund by Bat VC, a venture capital firm based in New York and founded by Indian tech veterans. This fund is specifically aimed at early-stage startups operating in the AI, fintech, and enterprise software domains across India and the United States. The timing of this fund coincides with increasing venture capital interest in India, especially as the country positions itself as a resilient alternative in the global tech supply chain.

Simultaneously, India is investing heavily in its digital infrastructure. Bharti Airtel’s data center arm, Nxtra, has announced plans to double its capacity to nearly 400 megawatts by 2027. This ambitious expansion, backed by a $600 million investment, seeks to address the growing data needs of businesses and consumers. It’s worth noting that while India currently generates around 20% of the world’s data, it hosts only 3% of global data center capacity. Bridging this gap could significantly enhance the nation’s digital economy.

Indigenous AI: India Bets on Homegrown Language Models

Another critical milestone is the selection of Sarvam AI to build India’s first indigenous large language model (LLM) as part of the government’s IndiaAI Mission. The initiative is aimed at boosting the country’s technological self-reliance and ensuring that future innovations in artificial intelligence align with Indian values, languages, and data sovereignty goals.

Sarvam AI, which has been recognized for its pioneering work in generative AI, will lead this effort to create a multilingual model tailored to the Indian context. The government's focus on indigenous AI development reflects a broader strategy of reducing dependence on foreign technologies while fostering a vibrant domestic ecosystem for cutting-edge research and applications.

Market Snapshot

Here’s a quick overview of the current financial market performance:

• Nifty 50: Opened above 24,600 points, reflecting cautious optimism.

• BSE Sensex: Gained over 350 points during early trade, buoyed by select large-cap stocks.

• Power Grid Corporation of India: Its shares fell by 3.40%, closing at ₹298.55, underperforming its industry peers. This may reflect sector-specific concerns or company-level headwinds.