Friday Sees 1,600 Point Jump As Markets Settle Down To New Order
Bank stocks drove the index after the Reserve Bank of India (RBI) left interest rates unchanged during its June monetary policy
On Episode 314 of The Core Report, financial journalist Govindraj Ethiraj takes you through the top business stories of the day. We also feature an excerpt featuring DK Joshi, chief economist at CRISIL, from a recent weekend edition panel discussion on India’s economic agenda.
Our Top Reports For Today
SHOW NOTES
(00:00) Stories Of The Day
(03:05) Friday sees 1,600 point jump as markets settle down to new order, set to stabilise further
(05:38) India’s medium term growth targets, revisiting them in the context of a new Government
(12:55) China slows down on buying gold, will that affect prices?
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
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Good morning, it's Monday, the 10th of June and this is Govindraj Ethiraj broadcasting and streaming from and headquartered in Mumbai, India’s financial capital.
Before I start, it is evident now that the markets have been swinging quite wildly in the last week…and of course so much so that we have ended up better off than where it began but like I argued last week as well, it would have done you good to take a figurative vacation from Saturday 1 June to Friday June 7.
You may have lost a little or gained a little but largely you would have been in roughly the same position on 1 or 7 June.
More on that shortly.
The larger takeaway of course is that it is most dangerous to time markets around big bang events like election results.
It is of course worse to take cues from exit polls.
Speaking of which, the problem works both ways. Let's imagine the exit polls were right or close to right.
What would have happened ?
The markets would have crashed, exactly as they did on June 4, the day the votes for the General Election 2024 were counted. But they crashed on June 3, the Monday they opened for trade.
What would have happened after ?
Well, they would quite likely have risen again on June 4 because the markets would see that the situation unfolding was not some doomsday scenario.
And thus would come to a somewhat calm conclusion that the results technically speaking were pretty close to what they had priced themselves in the last few months which is for the BJP coming back to power. Yes, it is in a coalition along with two other allies and that changes things a bit.
Of course this is all theoretical.
But fact is whichever way they move, the exit polls are an unnecessary emotion trigger for the stock markets which we can do without.
And there is one external factor that clearly influenced the markets in a manner it should not have been allowed to. Which is politicians making forward looking statements about markets. They should not be allowed as companies are not allowed to.
I would think we really stretched things this time.
Regulatory agencies should put out clear directives which prohibit politicians from making statements about stock markets, except through the rear view mirror to take credit for the past which they are most welcome to.
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Friday Moves
The markets were expected to rise and stabilise since it was clear that the new Government was set to take charge yesterday, that is June 9 but the 1,619 point jump was a bit of a surprise including to me.
In context, The Nifty has added 3.4% this week, while the Sensex rose 3.7%, recouping all losses made on Tuesday, or June 4, the day votes were counted.
And now, the Nifty logged its best week since early December, while the Sensex recorded its best week in nearly two years, according to Reuters.
Bank stocks drove the index after the Reserve Bank of India (RBI) left interest rates unchanged during its June monetary policy.
That and the anticipation of stability within the coalition government at the Centre boosted sentiment.
The BSE benchmark closed at 76,693, up 1,619 points while the NSE Nifty50, on the other hand, ended at 23,290, up 469 points, both in the region of 2%. The mid and small cap indices also rose around 2%.
There is a lot of data flying around on FIIs and DIIs investments in the market. I feel this is misleading and being totally thrown around without context. FIIs come and go as they have for three decades.
There is nothing in their behaviour that suggests they are buying differently from before. Domestic investors at this scale are a newer lot but they have not seen real fear grip the markets so we don’t know how long they will continue to invest and when they will pause.
No market goes up all the time - as some geniuses would like you to believe and nor does it go down all the time either.
Be careful of both.
Elsewhere, in a sign that fresh supply of stock will keep coming in to make good use of all the money investors continue to pump into the markets, Bajaj Housing Finance Ltd has filed with the country's markets regulator to raise up to 70 billion rupees ($838.11 million) through an initial public offering (IPO), it said in a statement on Saturday.
The firm, a unit of non-bank lender (NBFC) Bajaj Finance, will raise funds through a primary issue worth 40 billion rupees.
The company is the first high-profile firm seeking regulatory approval for an IPO after the recent national elections, Reuters reported.
India’s Medium Term Growth Outlook
Speaking of finance.…
The RBI's Monetary Policy Committee (MPC) kept the key repo rate unchanged at 6.5 percent for the eighth consecutive time on June 7.
The MPC, headed by RBI governor Shaktikanta Das, also decided to continue its stance of 'withdrawal of accommodation'.
All this was seen as good news for the markets.
So let's pick up on both interest rates and the medium term growth outlook, both key contributors to how the markets were perceiving the near future.
I spoke with Crisil Ratings Chief Economist D K Joshi on The Core Report’s Weekend Edition and began by asking him first, how he was projecting India’s growth outlook and then some context on interest rates and where we stood right now.
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Gold Falls After China Stops Buying
China’s central bank didn’t buy any gold last month, ending a massive buying spree that lasted 18 months, helping push gold prices to a record high in May, Bloomberg is reporting.
Spot prices for gold fell 1.5% after the People’s Bank of China said its bullion holdings were unchanged at the end of May.
The bank had been adding to its gold reserves since November 2022, along with other central banks including India.
One trader told Bloomberg that China will continue to buy gold but is pausing because prices are so high.
Gold had hit an all-time high above $2,450 an ounce in May.
First-quarter purchases by the world’s public institutions were at record levels, with China the biggest buyer, according to the World Gold Council.
More on China. China is exporting even more even as countries like the United States raise tariffs
China’s exports grew at a faster rate in May with outbound shipments rose 7.6% from a year earlier in May, up from the 1.5% increase in April.
The result topped the 4.8% growth expected by economists in a survey by The Wall Street Journal.
Shipments to the economies of the Association of Southeast Asian Nations, China’s top trading partners, rose 22.5% in May, accelerating from April’s 8.2% increase.
Meanwhile, exports to the U.S. rose 3.6%, reversing from a decline in April. Exports to the European Union were down 0.1% in May, compared with April’s 3.6% drop.
US traffic increases will start kicking in later this year.
