Markets Are Back To Feeling Jittery
The markets are back to feeling jittery now, technically for the fifth day since benchmark indices fell
On Episode 306 of The Core Report, financial journalist Govindraj Ethiraj talks to veteran economic journalist and author Shankkar Aiyar as well as Deepti Saletore, principal economist at Crisil.
Our Top Reports For Today
SHOW NOTES
(00:00) Stories Of The Day
(01:09) Markets are back to feeling jittery, is talking up the market counter productive?
(14:25) FDI into India slows down
(15:29) Monsoons have arrived earlier, interpreting the economic impact
(25:03) And now, orange juice prices hit record highs. Expect more mixed juices
(26:49) Air Passenger demand now growing for 36 consecutive months says IATA
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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Stock Markets Final Jitters
It's the slog overs to use some cricketing cliches since we love cricket as much as we love politics.
The markets are back to feeling jittery now, technically for the fifth day since benchmark indices fell and the numbers fell in a moment.
India is not alone in the region.
Asian stocks fell 1.3%, tracking the overnight drop on Wall Street on increasing bets that global interest rates would stay higher for longer, Reuters reported.
Back home, I do hope India’s politicians realise the markets have been nervous or falling almost ever since they have been trying to talk it up.
Markets will focus on the number of seats won by the party they expect to win, which is the BJP and compute the basis of that.
There is nothing one can do before June 4 and should not, in that regard.
It is also likely that the heat is affecting people.
Stock Brokerages are putting out extreme situations and how billions of dollars will either come in or fly out depending on what happens on June 4.
Perhaps they, in this case, Nomura, should focus more on identifying long term stocks and buys which they are good at.
Another brokerage CLSA put out a list of Modi stocks referring to companies like Mukesh Ambani-owned Reliance Industries (RIL), Sunil Mittal-controlled Bharti Airtel, Indus Towers, and shares of select public sector undertakings like ONGC, Indraprastha Gas Limited (IGL), NHPC, which analysts at CLSA have termed as 'Modi stocks' in a recent report, have outperformed the Nifty50 in the last six months.
Against the 14 per cent rise in the Nifty, the average up-move for ‘Modi stocks’, CLSA said, has been 50 per cent over the past six months.
This may be the basket which continues to rally the most if the market celebrates a strong election result for the ruling party on June 4, or vice versa.
The Modi stocks are obviously linked broadly to public expenditure and in some ways policy.
While the arguments for the selection of such stocks are not necessarily biassed, the optics of this for a market that would like to call itself developed or aiming for it, are quite unfortunate. And of course avoidable.
More on this in a moment.
Meanwhile, the markets fell for the fifth day.
The BSE Sensex sold off faster in the second half on Thursday, closing 617 points, or 0.83 per cent, at 73,886 levels.
The Nifty50, ended below the 22,500-mark at 22,489, down 216 points or 0.95 per cent.
Oil prices fell for a second session as traders watched for US stockpiles data and an OPEC meeting over the weekend for more clarity on the supply-demand outlook, Bloomberg reported.
Global benchmark Brent crude traded near $83 a barrel after falling 0.7% in the previous session.
Global markets and Wall Street have affected sentiment at home too.
The Dow Jones Industrial Average opened lower on Thursday, extending recent declines.
An unexpected surge in bond yields has put pressure on stocks in recent days though they drifted lower overnight and fell further Thursday morning after the release of somewhat soft economic data, WSJ reported.
The economy is cooling, which could make it easier for inflation to ease to the US Federal Reserve’s 2% target.
Back home, something that the markets should generally greet with optimism is the early arrival of the monsoons. Whether that happens today or a later date is another story. More on the monsoons and their economic impact shortly.
There are some larger questions which I thought I would address at the beginning of this show.
What does the economy look like beyond elections?
Specifically, will it be more dependent on public investment or private investment, since that is the larger message the Modi stocks reports and such reports are trying to send, or so I think.
Is that an ideal situation then ?
And why are politicians talking up the market right now ?
I put these questions to veteran economic journalist and author Shankkar Aiyar.
I began by asking him why the political class was referring to stock markets in recent interviews and of course how he was reading it.
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FDI Into India Has Fallen Further
Foreign direct investment inflows into the country declined 3% to $44.42 billion in the financial year-ended March 2024.
This was attributed to a slowdown in services and computer software investment.
Construction activities and development, particularly infrastructure and power, saw an FDI upswing in the fiscal 2023-24, bridging the quantum lost out by usual FDI inflow sectors like services, computer software and hardware, drugs and pharmaceuticals, and chemicals, NDTV Profit reported.
FDI inflows fell by 3.49% to $44.42 billion in 2023-24 from $46.03 billion in the fiscal 2023, according to data released by the Department for Promotion of Industry and Internal Trade on Thursday.
Top inflows were seen from Singapore at $11.77 billion, accounting for 26% of all inflows between April 2023 and March 2024. Singapore ranks second behind Mauritius, in terms of total FDI inflow in the last two decades into India.
Monsoons Are Early
Monsoon rains hit the coast of Kerala, India’s southernmost state on Thursday, two days sooner than expected.
Rains usually arrive in Kerala around June 1 and then move northwards helping farmers step up on planting of crops like rice, cotton and sugarcane among others.
The monsoon delivers nearly 70% of the rain that India needs to water farms and recharge reservoirs and aquifers.
Nearly half of India's farmland, without irrigation, depends on the annual June-September rains, Reuters summarised.
The rains will obviously help bring relief from the severe heatwaves the country is experiencing right now.
The monsoon set in over Kerala on Thursday, two days ahead of its normal date, and has advanced into most parts of Northeast India, said the India Meteorological Department (IMD).
Weather scientists said cyclone Remal, which swept through West Bengal and Bangladesh on Sunday, redirected the monsoonal flow towards the Bay of Bengal, potentially contributing to the early onset of the monsoon over the northeast, Business Standard reported.
In a bulletin, the IMD stated, "Southwest monsoon has set in over Kerala and advanced into most parts of Northeast India today, May 30, 2024."
Kerala has been receiving heavy rains for the past few days, resulting in a surplus May rainfall, according to weather office data.
The IMD has already predicted above average rainfall this year.
Rating agency Crisil has said that some areas and crops that see weaker rains for a second straight year could suffer more than others.
Crisil has created a Deficient Rainfall Impact Parameter (DRIP) index and says it will track this closely with rainfall this season
Crisil said that its results from last year’s DRIP2 show that some areas and crops did suffer in 2023 despite a normal overall southwest monsoon but an uneven distribution across states.
Of the states expected to receive deficit rains this year, Jharkhand, Bihar, West Bengal and Odisha require monitoring as they were impacted last year as well.
And the reason this all matters is this.
Rice, tur and coarse cereals saw last year’s uneven rains impact production and pushed up inflation rates for these crops.
Rice, for instance, saw an average inflation rate of 12.2% in fiscal 2024, around 33.4% and coarse cereals 10.9% in 2023-24.
I reached out to Dipti Deshpande, Principal Economist at Crisil and began by asking her how she was looking at last year versus what was being projected this year and then the larger agri economy including food inflation.
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Power Demand Peaks Again
India’s peak electricity demand set a new record thanks again to rising temperatures.
India reported a maximum demand of 246 gigawatts on May 29, according to data published Thursday by state-run Grid Controller Of India Ltd quoted by Bloomberg.
That tops a previous high of 243.3 gigawatts reached last September.
Some power shortfalls have been reported across the country during evening periods — when solar generation isn’t available — though day-time demand has so far been met, according to the operator.
The rising consumption has forced the government to revive output at gas-fired power stations, boosting demand for the fuel by as much as 12% from a year earlier, the managing director at Indraprastha Gas Ltd told Bloomberg.
JIO App
Jio Financial Services has introduced a new super-app for digital banking and payment services that is pitched against the likes of Google and Amazon.
The company announced the test version of its platform, named JioFinance, for UPI transactions, bill settlements as well as insurance related services.
Jio plans to expand into mutual fund loans and mortgage lending, it said in a statement Thursday.
There are super apps from other business groups like the Tatas who boast of wider consumer facing products and services at this point, ranging from hospitality, hotels, airlines to stores, beverages and online commerce.
Now, Orange Juice Prices Hit All Time Highs
Orange juice prices have climbed to fresh all-time highs amid persistent supply constraints, pushing the industry into crisis mode and forcing some makers to consider alternative fruits, CNBC is reporting.
Prices of the breakfast staple have been climbing rapidly in recent years, partly driven by declining output in Florida — the main producer of orange juice in the U.S. — and climate-fueled extreme weather in the main orange producing areas of Brazil.
The South American agricultural powerhouse is the world’s largest producer and exporter of orange juice, which means it plays a hugely influential role in shaping the global industry.
The benchmark frozen concentrated orange juice futures, traded on the Intercontinental Exchange in New York, closed at $4.77 per pound on Wednesday.
That’s nearly double the price registered a year ago.
CNBC quotes analysts saying Brazil typically produces about 300 million boxes of oranges each cycle, although climate change has dramatically reduced crop production. Climate change is making extreme weather events more frequent and more intense.
Fundecitrus said a series of intense heat waves in Brazil occurred at a critical phase of flowering and early fruit formation between September and November last year, substantially hampering production.
IATA
The International Air Transport Association (IATA) has said April 2024 global passenger demand measured in revenue passenger kilometres (RPKs), was up 11.0% compared to April 2023.
International demand rose 15.8% compared to April 2023; capacity was up 14.8% year-on-year and the load factor improved to 82.2% (+0.7ppt in April 2023).
Passenger demand has been growing for 36 consecutive months. As we enter the peak northern summer travel season, there is every reason to feel optimistic for a strong summer with airlines offering a wide range of travel options.
