A practitioner’s note for institutional fixed income portfolio managers in India — bank treasuries, insurance investment desks, and debt mutual funds.
05 OCTOBER 2026
At the moment, things don’t seem normal. RBI has conducted its 5th VRRR of the year, absorbing a record INR 25 lakh crores in just 40 days. The global fervour around AI stocks is high, and many companies (even private ones) are at hazy valuations. There is talk of an AI bubble and detailed video documentaries are springing up on youtube proving how a stock market crash is imminent.
The contagion channel also looks different this time.
Three main forces seem to be converging on the Indian Non-SLR book:
1 ) Geopolitics : The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 has been signed into law. This bill authorises tariffs of up to 100% on India for buying Russian oil. The Act hands Washington a permanent lever over Indian export competitiveness and India’s crude oil economy. Exporter industries, including apparel,machinery, electronics, auto parts and chemicals are large employers.
2 ) The ITES engine is sputtering. AI-driven disruption of the Indian IT services model is no longer a think-piece. ITES stocks are now collectively 50% below peak levels. ITES slowdown shows up in hiring freezes, deal-renewal pricing, and mid-tier IT credit spreads. Some of the expensive, uncertain acquisitions by IT giants look more like hedging activity rather than gaining foothold abroad.TCS paid Rs. 3575 crores to acquire Porsche’s IT consulting business in May 2026. Infosys paid Rs 5250 crores to acquire US based specialist IT firms Optimum and Stratus isn’t going to provide better footing in A structural slowdown in the sector that anchors urban consumption and CRE demand has second-order effects across the credit book
3 ) Our books are big enough to matter. Non-SLR portfolios at 10-15% of the balance sheet, concentrated in NBFCs, HFCs, and a long tail of A-category corporates, at spreads that do not compensate for a genuine downturn. SBI’s non-SLR portfolio was 22%, while PNB’s non-SLR portfolio was at 25% of total investments at March end 2025. “Buy and hold and it will mature at par” is a strategy that has worked for a decade. It is also exactly what everyone believed in August 2018, one month before IL&FS.
Here, our focus is neither on the bubble thesis, nor on the contagion channel.
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