Windmill Capital Investor Letter – May 2025 Edition
A monthly roundup of market movements, macro trends, and investing insights.
Markets Last Month
🔍 Decoding What Could Be Fueling the Nifty 500 Rally
Since the start of April, the Nifty 500 index has rallied nearly 8%, reversing its downward streak and restoring investor sentiment. What’s driving this surge?
1. Rupee Recovery and Foreign Inflows: A Reinforcing Loop
Foreign investor activity picked up sharply in May, with FPI inflows rising to ₹19,860 crore—up from ₹4,223 crore in April. A key reason? The rupee’s rebound. After a long spell of depreciation (from 83.86 to 87.49 per USD), the INR began appreciating mid-February. A stronger rupee improves dollar-adjusted returns for foreign investors, thereby boosting capital flows.
FPI Flows (₹ crore):
- Jan ‘25: +78,027
- Feb ‘25: -34,574
- Mar ‘25: -3,973
- Apr ‘25: +4,223
- May ‘25: +19,860
2. Macro Momentum Remains Strong
India’s economic resilience is showing up across key indicators:
- WPI inflation eased to 0.9% in April, down from 2.5% in February
- CPI inflation fell from 3.6% to 3.2%
- Composite PMI rose to 61.2 in May — signalling strong private sector activity
- Credit card spends surged 17.6% YoY (₹1.8 trillion in value)
- Port cargo volumes grew 5.8% YoY
- Domestic air traffic expanded 8.8% YoY to 1.44 crore passengers
3. RBI’s Policy Pivot: Turning Pro Growth
After holding rates steady for over a year, the RBI cut the repo rate by 50 bps in April, citing a benign inflation outlook, robust domestic growth, and expectations of an above-normal monsoon. The central bank also signalled an accommodative stance, highlighting its shift toward supporting growth.
The RBI forecasts 6.5% GDP growth in FY26, backed by strong private consumption, resilient exports, steady remittances, and continued government capex. Sectors like manufacturing are set to benefit from the PLI scheme, FTAs, and improved trade momentum.
Lower rates improve borrowing conditions, boost credit, and lift corporate profitability — all positive signals for equity markets.
Update: In its June policy, the RBI cut rates by another 50 bps and slashed the CRR by 100 bps — delivering a front-loaded monetary stimulus to further support growth.
🌏 Macro Spotlight: Eastward Shift – India Nears Japan in Global GDP Race
Asia’s economic centre of gravity is shifting once again — and India is fast emerging as the next heavyweight. According to the IMF’s latest projections, India is set to overtake Japan in 2025, becoming the world’s 4th largest economy by nominal GDP.
- India (2025 est.): $4.187 trillion
- Japan (2025 est.): $4.186 trillion
But let’s be clear: this is a projected milestone, not one that’s been crossed just yet. The actual data for 2024 still shows Japan ahead:
- India (2024): $3.91 trillion
- Japan (2024): $4.03 trillion
Still, the gap is narrowing — and the implications are significant. For decades, Japan has been Asia’s economic powerhouse after China. India’s rise signals a quiet, but powerful eastward reordering — one that could shape trade, capital flows, and influence for years to come.
Note: GDP rankings here are based on nominal GDP (not adjusted for inflation).
How the World’s Biggest Economies Have Moved
The chart displays the GDP rankings of major economies in the years 2000 and 2024. The numbers in red represent each country’s rank in 2000, while those in green indicate their rank in 2024. A lower rank corresponds to a larger GDP, while a higher rank reflects a relatively smaller economic size.
🔫 Borderline Breakthrough: India’s Defence Sector Scales Up
India’s defence production crossed ₹1.27 lakh crore, marking a key milestone in its journey from the world’s largest arms importer to a credible exporter.
Tensions at the border have accelerated investments in local defence infrastructure. Combined with policy push (Make in India for Defence), India is gradually building self-reliance in defence manufacturing — a sector that could be a long-term strategic and economic play. Read this article for detailed information.
🍎 Global Tensions: President Trump, Apple & the Great iPhone Tug-of-War
On May 23, 2025, President Trump took to social media to remind Apple and its CEO Tim Cook that iPhones sold in the U.S. should be made in the U.S. And if not, a 25% tariff might be knocking on their door.
This wasn’t new. Trump has long championed a “Made in America” iPhone – a MAGA-era trophy representing tech dominance and industrial muscle. But this time, the context is different.
In April, the White House had exempted smartphones and electronics from tariffs. Now, barely a month later, Trump is threatening to tax iPhones made in India — even as Apple’s manufacturing quietly shifts away from China.
🎬 Flashback: The Foxconn-Wisconsin Saga
Trump’s iPhone dreams go back years. In 2017, he announced a $10 billion deal with Apple’s supplier Foxconn to build an LCD factory in Wisconsin — dubbed the “8th wonder of the world.” The goal? Create 13,000 jobs and revive U.S. electronics manufacturing.
But the project faltered. By 2021, two of the buildings sat empty. What began as a manufacturing moonshot became more real estate than revolution.
🔄 Why iPhones Aren’t Moving to America
Trump’s demand, while headline-grabbing, oversimplifies the issue. Apple’s supply chain in China is a hyper-optimized, co-engineered web of factories, suppliers, and labor — something the U.S. can’t replicate overnight.
“Shifting iPhone production isn’t like moving a factory — it’s like relocating a space station.”
Even if Apple tried, costs would skyrocket:
- The iPhone 16 Pro (currently ~$1,199) could jump to $1,500–$3,500
- Apple may need to invest $30 billion over 3 years just to shift 10% of its supply chain
🇮🇳 India: Apple’s Plan B (Maybe Plan A)
India is benefiting from Apple’s China+1 strategy:
- Foxconn is investing $1.5 billion into a new Indian plant
- Reports suggest most U.S.-sold iPhones could carry a “Made in India” label by 2026
Still, India can’t yet match China’s scale, supplier density, or speed. Apple’s long-term bets in India are growing — but replacing the Chinese ecosystem isn’t a plug-and-play job.
In Summary
Trump wants iPhones built in America. But the math, logistics, and global reality make that dream a tough sell for Apple, and for your wallet.
India, meanwhile, is quietly becoming central to the next leg of Apple’s manufacturing evolution.
💹 The Financialisation of India: From Property to Portfolios
One of the most significant yet underappreciated transformations in India’s economic story is the financialisation of household savings.
For decades, Indian families largely stored wealth in physical assets: gold, real estate, and cash. But over the past decade, a quiet revolution has taken place, with capital steadily moving into financial assets like equities, mutual funds, and insurance.
📊 A Decade of Change: The Numbers Speak
- In 2013, real estate dominated household wealth, while equity made up just 2.2%.
- By 2023, that number more than doubled to 4.7% — a 5.8x jump in absolute equity value.
- Demat accounts have surged nearly 10x — from 2 crore in 2013 to 19.4 crore by April 2025.
- The mutual fund industry has seen explosive growth:
From ₹12 lakh crore in 2015 → ₹70 lakh crore in AUM by March 2025 - SIP contributions now average ₹23,330 crore every month, highlighting a shift toward disciplined, long-term investing.
🛡️ The Rise of the Retail Investor
As this trend strengthens, Domestic Institutional Investors (DIIs), powered by retail flows, are emerging as a shock absorber against volatile FPI behaviour.
What once felt like a market overly reliant on foreign capital is now increasingly resilient and domestically anchored.
“The Indian retail investor is no longer a bystander…they’re now a force shaping the market narrative.”
The Indian investor has undergone a quiet revolution — steadily moving from property and gold to equities, SIPs, and long-term portfolios. This isn’t just a shift in where capital flows. It’s a shift in mindset. And it’s making the Indian market stronger, deeper, and more resilient from within.
🧠 Closing Thoughts
The market rebound in May is backed by improving macros, returning foreign interest, and strong domestic participation. But caution is still warranted.
What to watch ahead:
- Monsoon performance
- Corporate earnings trajectory
- Global macro surprises (e.g. Fed policy, oil prices)
As always, a diversified, long-term approach rooted in discipline remains your best investment strategy.
Logic Behind the Latest Rebalance of Our smallcases
This rebalance cycle, our model-driven and quant-based smallcases were reviewed and updated. Given the breadth of updates this month, we’ve highlighted the rationale behind changes in some of our most popular smallcases below.
🌀 Windmill Wisdom
From market moves to money moods, the latest from our desk.
V&M Viewpoint
Recent lag in focus — and how we interpret it.
Read our perspective →
India Inc. Earnings Review
What slowed down, what picked up and what it means for India in FY26.
Read report →
TVS Grew +22%. Why?
Outpaced peers last quarter.
Read outperformance →
Mahindra Surged +247%
A closer look at its multi-year breakout.
Unpack the growth story →
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