Markets Are Now Wary of Trump Announcements
A five year wait for an interest rate cut which finally happened on Friday did nothing to cheer markets which continued to slide away
On Episode 504 of The Core Report, financial journalist Govindraj Ethiraj talks to Dr. K Joseph Thomas, Head of Research for Emkay Wealth Management. We also feature an excerpt from our interview with Kamal Kishore Chatiwal, Chairman of Indraprashta Gas Limited (IGL) as part of our Energy Special series with IEW.
(00:00)Stories of the Day
(00:50)Markets are now wary of Trump announcements
(05:09)Gold is inching towards Rs 90,000 per 10 gm
(06:57)Will there be more interest rate cuts now?
(17:20)Why are there long lines outside India’s CNG pumps?
(29:03) Europe’s stocks are suddenly looking hot
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Monday, the 10th of February and this is Govindraj Ethiraj, headquartered and broadcasting and streaming like always from Mumbai, India’s financial capital.
The top stories
Markets are now wary of Trump announcements
Will there be more interest rate cuts now?
Gold is inching towards Rs 90,000 per 10 gm
Why are there long lines outside India’s CNG pumps?
Europe’s stocks are suddenly looking hot
Markets
A five year wait for an interest rate cut which finally happened on Friday did nothing to cheer markets which continued to slide away.
The Reserve Bank of India (RBI) announced a 25 basis points repo (bps) rate from 6.5% to 6.25%.
The central banker, however, left the policy stance unchanged.
The RBI MPC has also unanimously decided to maintain its 'neutral' stance and remain "unambiguously focused on a durable alignment of inflation with the target while supporting growth", said RBI governor Sanjay Malhotra.
On the bourses, the BSE Sensex swung sharply almost 900 points during the day before closing down 198 points at 77,860.
This was the third consecutive session the Sensex was down though it was still positive for the week, ending 354 points higher.
The NSE Nifty 50 index was down at 23,560 - down 43 points.
In the broader market, the MidCap indices managed to end the day with marginal gains, while the SmallCap registered mild losses. India VIX - the volatility index dropped 4 per cent.
Foreign portfolio investors are still selling, having net sold about $9.5 billion of Indian stocks over 2025 so far.
Wall Street is now wary of President Trump and his tariff moves, including reciprocal tariffs and stock prices were down on Friday on account of that.
The Dow Jones Industrial Average fell 444.23 points, or 0.99%, to close at 44,303.40. The S&P 500 declined 0.95% to 6,025.99, and the Nasdaq Composite
slid 1.36% to end at 19,523.40.
Friday’s losses left the major averages in negative territory on the week.
“I’ll be announcing that next week reciprocal trade, so that we’re treated evenly with other countries,” said Trump during a meeting with the visiting Japanese Prime Minister Shigeru Ishiba. “We’ll have a news conference, and we’ll lay it out pretty simply," CNBC reported.
Elsewhere, Amazon lost 4% after guidance from the e-commerce giant disappointed investors.
The company called for revenue growth of 5% to 9% in the first quarter, its weakest growth on record. The outlook overshadowed top- and bottom-line beats in the fourth quarter. Alphabet continued to fall following somewhat-disappointing results earlier in the week.
It has been a volatile week. Stocks fell on Monday after President Donald Trump over the weekend announced 10% tariffs on China. He also proposed, then later paused, 25% levies on Canada and Mexico. The S&P 500 then gained for three straight days on the tariff reprieve before falling again on Friday.
Back to Indian markets, there are still varying views on valuations. An unconfirmed report by a leading Wall Street brokerage says the Nifty’s recent market correction is largely over and it could resume its outperformance among emerging markets in 2025, assuming global conditions stay stable.
The firm expects India to be one of the best-performing EMs, citing strong macroeconomic stability, forecasted earnings growth of 18-20% annually over the next four to five years, and robust domestic capital inflows.
Key catalysts include potential government reforms, fiscal policies, and a dovish Reserve Bank of India (NSE:BOI).
The firm sees a 19% upside in the BSE Sensex by December 2025, assuming stable domestic growth, no U.S. recession, and moderate oil prices.
On the other hand, well known New York based valuation guru and investor Aswath Damodaran wrote in his blog over the weekend that the most expensive market in the world is India, and no amount of handwaving about the India story can justify paying 31 times earnings, 3 times revenue and 20 times EBITDA, in the aggregate, for Indian companies.
The US and China also fall into the expensive category, trading at much higher levels than the rest of the world, on all three pricing metrics.
This observation was part of a research study he did on index performance across markets.
India and China broadly returned just under 8% in 2024 so it was not a very good year for both markets.
The US was up 23%.
The best performing market was Argentina, which grew over 172%.
Gold Continues To Rise
Elsewhere, gold prices continue to skyrocket.
On Friday, they rose for a sixth consecutive week thanks to rising trade tensions and general uncertainty.
Spot gold gained 0.2% to $2,861.46 per ounce as of 01:41 p.m. ET (1841 GMT), up more than 2% this week, after hitting a record high of $2,886.62 earlier in the session.
The gold market also seems to have been buoyed by both continued growth in the People's Bank of China's gold holdings and a new Chinese program allowing insurance funds to invest in gold, an analyst told Reuters.
In India, Gold Rate and Silver Price Today on February 8, 2025: Gold prices experienced a modest decrease on Saturday. The cost of 24 carat gold in India is Rs.8667.3 per gram, reflecting a decrease of ₹ 20.0. The cost of 22 carat gold in India is 7946.3 per gram, a fall of ₹20.0.
The price fluctuation of 24 carat gold over the past week is recorded at -2.04%, while over the last month, the change stands at -8.15%.
The current price of silver in India is 102500.0 per kg, reflecting no change
Meanwhile, oil
Oil posted its third straight weekly decline as concerns that US President Donald Trump’s tariffs on China will sap demand outweighed his first round of sanctions against Iran, Bloomberg reported.
Brent crude is quoting around $74.66 a barrel.
Crude still ended the week down 2.1% as Trump’s levies on imports from China and the country’s planned countermeasures threaten to slow global growth.
Refiners in the Asian nation have apparently slashed operating rates to lows last seen at the beginning of the pandemic.
Previous US sanctions on Russia cut a key source of China’s crude supply, and demand also appears to be faltering.
Interest Rate Cuts
India's central bank will be agile in responding to the liquidity needs of the banking system, Reserve Bank of India (RBI) Governor Sanjay Malhotra told reporters on Saturday.
"We will be very, very watchful, alert and very nimble and agile in whatever are the requirements of the banking system to provide liquidity, both transient, overnight, as well as more durable liquidity," he said.
He also said the RBI is not targeting any price band for the rupee and focusing more on curbing excess volatility.
So, what can one take away from the first interest rate cut after 5 years to 6.25% and what will the impact and likely transmission be ?
I spoke with Dr K Joseph Thomas, Head of Research for Emkay Wealth Management and began by asking him how he was looking at the impact of the interest rate cut.
INTERVIEW TRANSCRIPT
Dr Joseph Thomas: It's a good first step that the Reserve Bank of India has taken to address certain requirements of the economy. Because the RBI governor himself said that the inflation growth dynamics at this juncture has opened up a better space for the Monetary Policy Committee to take great decisions, which means that as far as growth is concerned, we have seen the growth slip to 5.4% in the last quarter and it's likely to average out to around 6.4% as forecast by RBI and some other agencies for the whole year. So rate of economic growth has come down quite substantially.
Second thing is that when you go to inflation, as far as inflation is concerned, the problem was coming mainly from the food inflation and in food inflation it was the prices of fruits and onions and tomatoes which had actually influenced the price level and the food inflation which was at around 10.87%, the month before the last has now come down to around 8.5% and it is expected to be still lower because for the current month and for the last month it would be still lower because prices have actually come down and it is expected to average out to around 4.20% for the next year. That's the view given by the RBI. So there is an immense amount of comfort as far as inflation and trajectory is concerned and we do not expect any major impact of oil prices on inflationary expectations because oil prices have stabilised in the range of around $75 to $80.
That's the price of Brent and we expect it to continue in that range most of the time. So there are concerns on growth. The concerns on account of inflation have moderated and this has given RBI the space to cut the rates so that credit becomes cheaper and less expensive especially for major sectors of the economy including housing, giving housing loan at much cheaper rates, even corporate credit.
So we need a cheaper credit to get over the current situation and then stimulate domestic demand for which additionally the 1.1 lakh crores of tax concessions given to salaried persons is one of the things that go into supporting a demand in the economy.
Govindraj Ethiraj: Do you see a time frame for this transmission?
Dr Joseph Thomas: Usually transmission of rate cuts happen over three to six months time period and the medium of transmission like when I'm speaking the way the sound is transmitted through air or through electronic networks, liquidity is the medium through which RBI policy transmits itself into the lower levels of the economy. So at this point of time we see a deficit in the liquidity conditions mainly on account of the RBI intervening in the currency markets and then taking away rupees on a regular basis to prevent a steep fall in the rupee against the dollar. So the medium of transmission which is liquidity is short at this point of time by approximately 50,000 crores of rupees though it was as bad as deficit of three lakh crores few weeks back it has come down now.
That is after the CRR cut which injected about 1.15 lakh crores and then the open market operations also lined up, RBI's variable rate repos are on, the dollar rupee swap is there and all these things have gone into reducing the liquidity deficit in the market to a significant extent. No such thing was announced in the monetary policy announcement because these liquidity related things are not required to be part of the core of the monetary policy. This can be taken and announced even outside of the policy.
Govindraj Ethiraj: Yeah but there was a sense of assurance of liquidity.
Dr Joseph Thomas: Absolutely even in the press conference subsequent to the monetary policy announcement the governor assured the market that they will take care of the liquidity requirements and they'll be quite nimble about that. Earlier many years back RBI used to follow a monthly or a quarterly forecast of liquidity for the money markets and currently I think they do it even on a weekly basis and even on a daily basis the money market conditions forecast is done at greater frequency. So which means that they are on the job and they have a more scientific analysis of things and they will respond to it as and when required.
Govindraj Ethiraj: What does this mean for how banks are going to perform or how banks operations, operations I mean financially would be affected I mean positively or otherwise?
Dr Joseph Thomas: Rate cuts are always and also liquidity injection is always good for the market for the banking system because banks in the immediate banks will benefit from this because the first thing that they would do is to bring down the deposit rates and it is followed by a reduction in the lending rates. Lending rates come down slower and much later. The deposit rates come down much faster therefore in the immediate banks may gain on account of higher net interest margin.
That's one of the benefits that would accrue to the banking system with rate cuts and with better liquidity conditions in the interbank market the bank treasury portfolios which contain a lot of SLR securities and non-SLR which have plenty of government of India securities they would gain in value with falling yields. Though today there was an uptick in the 10-year benchmark yields we expect the overall market yields in the entire spectrum of maturities to gradually move down and once these price gains on the portfolios SLR non-SLR the banks would tend to book much higher treasury profits in the coming days.
Govindraj Ethiraj: Internationally at least in the European Central Bank, UK Central Bank and of course the Federal Reserve we've seen a pattern of interest rate reductions. Now this is India's first. Are you expecting or foreseeing something along those lines I mean a pattern of rate cuts?
Dr Joseph Thomas: Yes, we expect another 75 basis points to 100 basis points rate cut during the course of this calendar year. We have barely one and a half months left for this financial year and for the rest of the calendar year that's from April to December we expect a 75 basis points to 100 basis points further cut in the repo rate to come through which will take us to around maybe one and a half percent totally of rate cuts during the course of this year and towards the end of the next financial year. So this is just the beginning of the rate cut.
Once RBI gets greater comfort as far as inflation is concerned they will go in for further rate cuts and this is the first rate cut after five years and if you look at forecasts on the Fed rate cuts last year most of the year people said that only in the second half of 2025 the Fed would go in for the first rate cut but it happened much earlier than that. So we expect RBI to cut rates further and bring down the interest rates and also supply plenty of liquidity into the system because there is a lot of comfort as far as inflation is concerned because it's moderating and also greater comfort as far as greater need as far as the growth requirements are concerned. So the space is now open for the MPC to take those decisions.
The final thing is that the monetary policy very well complements the fiscal policy and the fiscal measures announced in the budget. So both these two things working together should be good for growth and the stability for the economy.
Govindraj Ethiraj: Thank you so much for joining me.
Dr Joseph Thomas: Thanks Govind. Thank you very much. Have a good weekend.
Rupee
Elsewhere, for rupee watchers, last week was an easier one.
Expectations that the Indian central bank will cut rates had also weighed on the rupee earlier in the week.
On the day, the currency rose about 0.2% to end at 87.4250 against the U.S. dollar. It declined by nearly 1% on the week though, its worst weekly performance since December 2022.
Asian currencies were mostly higher on Friday and the RBI likely intervened to support the rupee ahead of the policy decision.
The rate cut had a negligible impact on the rupee with the dollar-rupee pair "finding support from the Governor’s statement that the RBI FX intervention policy will continue to focus on smoothening excessive and disruptive volatility," said Sameer Karyatt, executive director and head of trading at DBS Bank India.
The rupee had declined to its all-time low of 87.5825 on Thursday after breaching the 87 handle on Monday, following the announcement of U.S. tariffs on Canada, Mexico and China.
The Lines For Gas
There is no doubt that compressed natural gas is a more economical option to petrol or diesel and you can gauge that by the sales of cars that come predicted with them, close to dozen Maruti models, apart from those who retrofit them.
Bajaj Auto launched the first CNG two wheeler the Freedom 125 last year.
Not surprisingly, there are long lines at CNG pumps, at least in Mumbai where I live.
On the India Energy Week special series of interviews, I spoke to Kamal Kishore Chatiwal, Chairman of the state-owned Indraprashta Gas Limited, which distributes CNG in Delhi and surrounding areas as well as piped natural gas to homes there.
I asked about why there were usually long lines and then onto the mechanics of CNG distribution and how it works.
TRANSCRIPT
Kamal Kishore Chatiwal: Just to give you a brief that CNG is another form of fuel and unlike the liquid fuel, the density is very low here. So the filling time for the same amount of fill is slightly more.
Say for example, when you fill a petrol car, it takes a one minute or two minutes depending on the condition of the fuel tank, if it is you have to fill 10 litres, 20 litres, it may take one or two minutes. But in the same, if you have to fill a CNG, that will take five to six minutes. That is number one.
Second is that in one fill, a car has say 40 litres of petrol, whereas in one fill, the CNG vehicle has only 8 to 10 kgs. And in kg and litres, if you take equivalence, about 1.2 times litres or 1.23 times is the kg. So in one fill, you only get 8 kgs.
So same car, if it is filled, you need to get it five times to get the equivalence, four to five times. So the number of trips to the fuel station, they also increase. So the same number of vehicles, it gets five times.
Say in a city, there are 10 lakh vehicles. So for CNG, they become 50 lakh vehicles because for the same distance, they will have to come to the station four to five times more. So that is the primary reason.
And second is the filling time is slightly more in the sense that 30 to 40 percent more than while filling the liquid because the volumetric flow rate and due to the safety concerns, safety reasons that you need to maintain certain amount of flow rate and velocity of the fuel. So that makes it I mean, the 40 to 50 percent more time is needed. And second is the number of trips the vehicle is making.
These are the two reasons with which you see and to mitigate that, what the industry has to do is put up more stations. So that is what we are doing. And I'm very happy to share with you that in the city of Delhi, you'll be pleased to know that there are more number of CNG stations than number of petrol and diesel stations.
So we have around 400 petrol and diesel stations, whereas CNG stations are around 500. So that is that is the way we are trying to mitigate. But still, I feel in a city like Delhi, which is growing very fast in terms of CNG vehicles, we need more infrastructure to take care of this.
And this issue is very dear to us that we need to mitigate this and we need to create a situation where any CNG vehicle owner goes to a station and he finds it empty. One or two dispensers are empty. That is the kind of vision that we have for the city of Delhi and everywhere that we are operating.
Govindraj Ethiraj: Right. And I'll come to CNG as a fuel in a moment. So this is what we spoke about is what's happening at the station.
Now, take us backwards and tell us about the journey of either that cylinder of CNG and where it comes from and what is the Indraprastha Gas Company all about?
Kamal Kishore Chatiwal: You see, the history of IGL, if I take you to the history of IGL, it goes back to late 1990s when MGL was also formed around that time, 1996. So in the 90s, there was a situation in our cities where when they were running on diesel powered vehicles as well as some thermal plants were also there. So while moving in the roads, you could see a lot of soot as well as a lot of particulate matter, SPM.
So they were very, very high. Like, for example, I grew up in Delhi and I can tell you that in the 90s, if you walk around without specs or without helmet or the open helmets, then you can clearly see that your eyes are red as well as your clothes. You know, if you wear a white shirt, it may become slightly grey.
Those kind of situation was there. So and this became, I would say, an emergency kind of situation, especially in Delhi. So a mandate came or the stakeholders came together.
And this was a new field that was already established in countries of Europe. So the technology was brought from there and a pilot project was started by GAIL and BPCL in 1996. And during that time, MGL was also formed and a pilot project was started in Delhi.
So this pilot project got converted into IGL. And in 23rd December 1998, IGL was formed. So since then, you know, subsequently we set up infrastructure in Delhi and immediately people could feel that there was a difference in the air quality.
You see, the gas, as you know, in India, 50 percent of gas is domestically produced. Right now, say if I talk about the total consumption of India, it's around 200 million standard cubic metres per day. Out of that, approximately 100 is domestically produced and the other 100 is imported and the import sources are U.S., U.S., Middle East, Russia, Australia and other small countries. So those are the sources. And the major import points in India are western coast. We have the H terminal, Hazira, Dahul, Kochi is also there.
And on the eastern front, Dhamra is there as well as Anore. So these are the ports where the gas lands. And from there, the gas, the beauty of natural gas is that unlike the liquid fuels, where, you know, primarily mode of transport is, you know, you're dependent on the road transport.
But in the case of gas, it is dependent on pipeline transport. So that makes it very, very safe, affordable as well as from the environmental perspective, because when you are running a diesel vehicle carrying petrol or diesel or other fuels, so again, the emission from that vehicle is also there. So that gas comes to Delhi via pipeline.
From there, we source, we have the GAIL network, which is primarily our, you know, NCR region is serviced by GAIL. So from there, we get the gas through our city gate stations and we have a network of 19 kg, which operates at 19 kg, the steel network. And subsequently, we have an MDP network, which operates at 4 kg.
So the steel network caters to your CNG requirement as well as it feeds to the MDP network. And the MDP network then goes to your PNG, which is industrial, commercial as well as domestic connections. So that goes to, so it's a kind of a ring, you can say, where we have four or five inputs from various city gate stations and then feeding to various MDP networks.
So in a city like Delhi, we have around 25,000 kilometres of pipeline network, both MDP and as well as steel. So that is the kind of development that a typical city gate, city CGD entity undertakes that first you develop a steel network and then feed to the MDP network and then to your individual households.
Govindraj Ethiraj: And the separation point or rather what is the separation point between compressed natural gas and pipe natural gas? And what's the fundamental difference in the way either it's separated or it flows subsequently?
Kamal Kishore Chatiwal: So basically, the molecule remains the same, you know, natural gas remains the same. Only the compressed natural gas, you have the pressure rating because it has to be filled in a cylinder. So we are operating at, say, 200 kg per centimetre square or 200 bar, you can say.
So that's the pressure in case of CNG. In case of pipe natural gas, since households don't require too much pressure, but you need to transport the gas from one place to other. So very small pressure of 4 kg is maintained in pipe natural gas system.
So that is the difference. And once it goes to the households, it is in millibar, you know, less than 10 millibar.
Govindraj Ethiraj: Right. And which I'm assuming is somewhat safer than classic cooking gas cylinder, which is at a much higher pressure.
Kamal Kishore Chatiwal: No, the primary difference is that cooking gas is heavier than air. So the fundamental difference is natural gas is lighter than air because primarily it is methane, which has less molecular weight than air. And your cooking gas, the LPG, what you call in India, C3 and propane and butane, mixture of propane and butane is heavier than air.
So what happens in case of leakage, if it leaks, it remains on the surface. And if it catches fire, if there is any spark, then there is a potential of major leak. But in case of natural gas, since it is lighter than air, it dissipates in the atmosphere.
So that is a major, major plus that the pressure, of course, in a cylinder, the pressure is also slightly higher and in a liquid form. So in case of any leakage, there is a potential that the gas will remain in that environment and any spark it can create fire. So that is the major difference.
Govindraj Ethiraj: And I guess that, I mean, a logical layman question here. So obviously, what is in the cooking gas cylinder is or LPG, liquefied petroleum gas, comes from a refinery, whereas what you are distributing as natural gas comes naturally. It does not go through the refining process.
Would that be correct?
Kamal Kishore Chatiwal: Yes, that is, you know, more or less correct. Only difference is that the only refinement that it does is it is the residue after, you know, whatever fractions you have to extract from natural gas. Natural gas contains heavier fractions and the lighter fractions.
So after extracting all the value added fractions, you know, you can say in carbon content wise, C1 is methane and C2 is ethane, propane, butane, like that. So you extract all those C2 plus components because they can be used for value added products like petrochemicals and other chemicals, speciality chemicals and other chemicals. But C1 what is left, you know, C1 has a major role in fertiliser production and whatever is the residue of that.
So you can say that the lighter fractions of natural gas, what is the residue after extracting all the C2 plus is used in city gas station. In the city gas companies, they use this, whereas the C3 and C4 are the fractions from refinery and they are mixed and then they are bottled. So all those effort is required and you need to do it continuously like in gas, in PNG network, the advantage is we create an infrastructure one time and then it is the infrastructure can take care of for you for many, many years.
Unlike, you know, the bottled gas, the infrastructure you have to create and a lot of logistics are required. First, you have to bring the raw material to that bottling plant, then it is bottled. Then again, you have to use some logistics to carry to the retail stations and then from there the distribution to individual households.
A lot of logistics are required, which is not required in case of pipe natural gas.
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European Stocks
Some of the world’s best-performing large stocks this year are European banks like Société Générale and Banco Santander, and the luxury houses Burberry and Richemont, a new report in the WSJ is saying.
Which is of course quite unexpected and out of the blue despite all the negatives including a slowing Eurozone and the threat of Trumpian tariffs.
One reason is DeepSeek.
Investors had expected Trump’s return to the White House would cement U.S. stock outperformance.
But that belief has been shaken, after the rise of Chinese artificial-intelligence upstart DeepSeek and lackluster earnings from heavyweights such as Alphabet and Microsoft.
In turn, that has pushed investors to reconsider unloved markets like those in Europe and Asia, says the WSJ.
Meanwhile, the political, economic and profit outlook for Europe is improving, while hopes that Trump will negotiate a cease-fire between Ukraine and Russia have also boosted stocks, particularly in Eastern Europe.
Moreover, European indices look cheap.
The S&P 500 trades at 22 times its projected earnings over the next 12 months, according to LSEG, compared with about 14 for the pan-continental Stoxx Europe 600 and 12 for U.K. stocks.
Moreover, profit growth is picking up. Stoxx Europe 600 companies’ per-share earnings are expected to grow 7.7% this year, according to FactSet, compared with a rise of just 2.6% in 2024.
And of course the dollar itself helps.
The strength of the U.S. economy—and the dollar—is good news for many large European companies, many of whom get more revenue from the U.S. than they do in their home market.
That means they are exposed to faster American growth, while a rising dollar makes those sales worth more when translated back into euros or pounds, says the WSJ.
