Industrial Stocks In India Record $125 Billion Rally
The S&P BSE Industrials Index - a gauge that includes makers of bridges, helicopters and wind turbines - has surged almost 54% this year, boosting the combined market value of its 214 members by about $125 billion
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) Industrial stocks in India record $125 billion rally, outpace consumption ones.
- (07:53) Bank lending to NBFCS jumps dramatically 3 times to Rs 14,00,000 crore in 5 years with Ajit Velonie
- (17:52) Massive spikes in new credit cards issued and spends in recent months
- (18:54) More people are watching satellite television, decoding the World Cup numbers with Sanjog Gupta
- (27:41) Indian students overtake Chinese in Germany, now at around 42,000.
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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Markets And Oil
Today is a market holiday, Guru Nanak Jayanti, so we will be still going with Friday data for Tuesday trade but there is lots happening around the world, including in oil which I will come to.
On Friday, the Sensex closed at 65,970 down 48 points while the Nifty50 closed at 19,791, down 11 points. No major moves but the benchmark indexes have now clocked a fourth straight week of gains, led by improved growth prospects in auto and pharma sectors.
Though the headline indices have been somewhat steady, the broader markets are strong with the BSE MidCap and Smallcap indices continuing to rise.
It's interesting how there was a patch around two months ago when all kinds of alarm bells started ringing on how midcap and small cap stocks and indices were overvalued or too rich.
Small- and mid-caps have gained 42% and 33%, respectively, so far in 2023, outperforming a 9.33% rise in Nifty 50, according to a Reuters computation.
We seem to be back at the point where the markets appear to feel there is not much choice anyway.
Where the markets seem to be training their eyes and energies on is obviously the Rs 7,000 crore of initial public offers that opened last week.
The Tata Technologies Rs 3,042 crore IPO saw a roughly 70 times subscription on November 24 or Friday, the final day for bidding.
Flair Writing’s Rs 593 crore was oversubscribed around 47 times while Gandhar Oil Refinery, oil for pharmaceutical industry, was oversubscribed around 64 times.
But over the years, there have been some interesting trends. In one line, Larsen & Toubro stock has done better than Hindustan Unilever, or infrastructure better than consumer.
Bloomberg says there is a tectonic shift toward industrial stocks in India, usually seen as a bet on consumption. This is also and obviously thanks to the Government’s big infrastructure and heavy industry linked spending.
The S&P BSE Industrials Index — a gauge that includes makers of bridges, helicopters and wind turbines — has surged almost 54% this year, boosting the combined market value of its 214 members by about $125 billion.
That beat an advance of 8.4% in the benchmark S&P BSE Sensex in 2023 and outpaced the gains in two indexes of consumer stocks that feature makers of household staples and discretionary goods.
The Rupee And Oil
The rupee is oscillating against the dollar but seemingly edging lower almost every week.
It ended at a record closing low on Friday, at 83.36 against the U.S. dollar, against its previous close at 83.34.
Asian currencies like the Thai baht and Korean won were under pressure too as they have been in recent times, even as U.S. Treasury yields rose. The 10-year yield rose to 4.47% and the 2-year Treasury yield was at 4.94%.
Wedding season is approaching, and some 40,000 marriages took place in Delhi on Thursday last week, being an auspicious day. Cities like Mumbai must have large numbers too but no one seems to be aggregating them here.
Some 3.8 million weddings are expected this season, with a spend of Rs 474,000 crore, till July next year - if I got that right, according to the Confederation of Indian Traders Association which appears to be doing a masterly exercise of collating wedding data, down the the fact that some 50,000 weddings will spend more than Rs 1 crore each.
Delhi alone will see 400,000 weddings this season which means a tenth of all couples getting married in India are in Delhi, or other numbers are not available. And the Delhi spend is believed to be around Rs 125,000 crore or almost a quarter of the national spend on weddings.
There are fewer auspicious dates until the end of December so activity will pick up again in January, CAIT has said.
Possibly because of that or for additional reasons, gold prices are not rising the way they would usually.
According to Reuters, lacklustre demand for gold during the wedding season in India has promoted dealers to offer steeper discounts.
The bullion industry was hoping the momentum seen during the festival of Diwali would continue, but higher prices seem to be hampering wedding season demand, a Mumbai-based bullion dealer with a private bank, told the news agency.
Local gold prices in India were around 61,100 rupees per 10 grams on Friday after hitting a record high of 61,914 rupees last week.
Speaking of weddings, the Prime Minister has urged Indians to celebrate their weddings in India, referring to the trend of international destination weddings. Is it necessary he asked, in his weekly radio show.
There are of course vanity reasons for going overseas but sometimes it is just plain cost and logistics.
Delhi traffic in the wedding season is a nightmare - not that it is not otherwise - and resort hotels in India, I would argue are more expensive than similar properties at least in South East Asia.
The cost of a wedding somewhere in SouthEast Asia, versus lets say Goa including the cost of lets say 150 families flying in and staying in for 3 nights for a Delhi-based family might be less.
Meanwhile, reports have emerged of an UAE based Indian businessman celebrating his daughters wedding on a Boeing 747 private jet on Friday.
Back on ground, or technically under it, oil dropped after struggling for direction in a low-volume session as OPEC+ tries to resolve a disagreement over output quotas that forced the group to postpone an important meeting.
The international benchmark Brent fell to settle below $81 a barrel after swinging in over a $2 range in low-liquidity trading.
“The oil price will probably tread water for the most part ahead of the meeting,” Commerzbank AG analysts wrote in a note adding that Saudi Arabia still appears willing to shoulder the lion’s share of the supply cut needed to stabilise the oil market,” Bloomberg reported
The NBFC Conundrum
Am sure you know that if you wanted a home loan or a car loan, you could go to a nationalised or private sector bank, like a SBI or ICICI or you could go to a non bank finance company, which could be a Bajaj Finance.
The way it works, the likes of Bajaj finance or the NBFCs are more efficient at disbursing loans, work often with fintech companies and grease and lubricate the processing and process so well that consumers are rushing to take loans, even if only to live a little more lavishly.
The data is showing this by the way.
Let me go through some numbers quickly.
Figures from Crisil Rating say total NBFC book is around Rs 27 lakh crore of which is divided roughly like this.
Home loans around 25-27%, vehicle loans around 25-27% and unsecured loans, the topic we have been discussing here in recent weeks in the context of their dramatic rise, around 12-14% around Rs 350,000 crore.
So unsecured loans of NBFCs are not that large in the scheme of things, actually 88% of loans are secured, which means there are some underlying assets. So why worry ? I will come to that in a moment.
The other big figure is that bank loans to NBFCs have gone from Rs 500,000 crore to a whopping (I don’t use that word much) Rs 14,00,000 crore or three times in just five years to 2023.
So this is an interesting situation, not new in itself, that banks are increasingly lending to NBFCs rather than directly to many, who in turn are growing in leaps and bounds.
Crisil says AUM of NBFCs could grow 14-17% next year thanks to continued strong demand across retail loan segments.
Remember, last week the RBI Governor said banks should cut back lending to NBFCs and that NBFCs should borrow elsewhere, referring to a possible contagion effect.
It’s all coming together, at least for me.
I reached out to Ajit Velonie, Senior Director, CRISIL Ratings and began by asking him what lay beneath these numbers before moving on to the other posers i mentioned earlier.
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Meanwhile, the spending and the race for credit continues unabated.
The number of credit cards issued from 65 million in January 2023 to 95 million in October 2023 and the spending has gone from Rs 142,000 crore in September to Rs 178,000 crore in October, a new high.
Festival sale pushes are obviously driving this but it is a new high nevertheless.
Point of sale transactions were around Rs 57,000 crore while ecommerce payments were around Rs 120,000 crore in October, the Business Standard reported.
HDFC Bank is the largest credit card issuer with around 19 million cars followed by SBI at 18 million and ICICI at 16 million.
World Cup Numbers
Things are looking up for Disney, globally and India, known as Disney + Hostar. Earlier this month, Disney globally reported better results on streaming and experiences, read parks.
In India, a business which is reportedly up for sale in the words of Disney’s CEO earlier, the ICC WOrld Cup Cricket 2023 turned in record numbers, which is a global record with concurrent viewers on streaming hit 59 million for the finals and 520 million tuned in to watch the tournament as a whole on traditional or satellite TV.
Disney Star also provided an extensive 11 feeds for ICC Men’s CWC 2023, including coverage in 9 different languages.
I reached out to Sanjog Gupta, CEO of Disney-Star Sports in India and began by asking him what stood out this season in terms of audience consumption and behaviour.
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Students In Germany
Indian students studying in Germany surged significantly over the past four years.
According to a report by Studying-in-Germany.org quoted by Mint newspaper, the number of Indian students in Germany has increased by 107% in 4 years.
As per the report, 20,562 Indian students were studying in Germany in 2019 which has now shot up to 42,578 in 2023 which placed India at the forefront of international student representation in Germany.
Earlier China had been the biggest source of international students in Germany but this position was taken over by India recently. Currently, 39,137 Chinese students are enrolled in German universities.
China has roughly 40,000 students in Germany, a figure reportedly similar to what it was in 2019.
The United States too saw a 35% jump in Indian student numbers annually, touching an all-time high of 268,923 in the academic year 2022-23.
China is ahead, but only slightly now around 290,000. Indians are almost a quarter of foreign students in the United States now.
