Markets Close Last Financial Year In Positive
Indian stock markets have done well in 2024-25 only because of some heavy hitting in literally the last few overs
On Episode 545 of The Core Report, financial journalist Govindraj Ethiraj talks to Madhavi Arora, Chief Economist, Emkay Global Financial Services as well as Aditya Valiathan Pillai, Visiting Fellow at Sustainable Futures Collaborative..
SHOW NOTES
(00:00) Stories of the Day
(01:09) Markets crackle in slog overs to close last financial year in positive
(02:14) Gold hits a fresh record high, up 37% in last financial year
(05:50) Credit card spends fall to a 7-month low of ₹1.67 trillion in February
(08:37) Tariffs will hit tomorrow, how should India be thinking about them going ahead?
(18:36) Fresh predictions on a hot April and summer. How should private and Government sectors be approaching this?
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 Tuesday the 1st of April and this is Govind Raj Yathiraj, headquartered in Broadcasting and Streaming from Mumbai, India's financial capital, and yet another financial year has gone by, that's 24-25, and this is the beginning of a new financial year, so all the very best for that, and our top stories and themes.
The stock markets crackled in the slog overs to close the last financial year in the positive.
Gold hits a fresh record high, it's now up 37% in the last financial year again.
Credit card spends fell to a 7-month low of about Rs 167,000 crore or Rs 1.67 trillion in February.
US tariffs will hit tomorrow, how should India be thinking about them going ahead?
And fresh predictions on a hot April and summer, how should private and government sectors be approaching this?
The Year Has Gone By
Before we look at the day ahead, let's look at the year that passed by. Indian stock markets have done well in 24-25, only because of some heavy hitting in literally the last few hours. It was like a test match ending with the frenzy of an IPL big league match, because as recently as March 4th, the BSE, Sensex, and Nifty 50 were in the red for the year, and a huge rally, at least by recent standards, in the Nifty 50 stock index in March, its best in 15 months, helped it pull back from losses and finish with gains.
So the Nifty rose about 6.3% in March, leading to about 5.3% gains for the year, that's April to March 31st, 2025, while the Sensex rose about 5.1% in March, and about 7.5% for the year. All of this was pretty much the weakest performance in 2 years. The Nifty Mid Cap 100 and the Nifty Small Cap 100 indices, which we also watch and track, gained about 7.5% and 5.5% respectively, that's for the last financial year. But gold was absolute gold, for investors who bet on it. In the last financial year, gold rose an amazing 38% to about $3,070 per ounce, its best performance since 2008. And pausing for a moment and to return to the current, gold has now hit a fresh high, shooting above $3,100 per ounce to hit close to $3,128 an ounce.
Now the last quarter itself, that's the 2025 quarter, has seen gold deliver its best since 1986, according to a Reuters analysis, which added that bullion has already gained about 18% this year. And of course, the way things are going, with all the tariff and geopolitical uncertainty, all signs are pointing towards gold prices staying strong for the rest of the year, or even longer. The rupee had a good second half of March, although overall it lost about 2.1% against the dollar in the last financial year, on top of the 1.5% in the previous financial year, that's 23-24. Now to come back to the markets, both the indices, markets and rupee have benefited from the U-turn that foreign institutional investors have taken to return to Indian markets apart from other factors. Foreign investors brought in about $3 billion or a little more into Indian stocks in the last six sessions, though they sold a net of about $16 billion in the last financial year, which is the second highest ever. The rupee, of course, as we said, proved more resilient than many regional counterparts, underscoring its relative strength.
Back on Monday, global stock markets fell after President Trump's threatened tariffs looked all set to go through on April 2nd, Wednesday. You'll start with all countries. President Trump said on Air Force One, that's the presidential aircraft late on Sunday, though he said the tariffs would be more generous than trade partners had been to the United States. The U.S. has already imposed several import tariffs and is set to introduce auto tariffs this week, which will hurt Indian auto component makers the most. The Wall Street reported the president saying over the weekend that he couldn't care less if prices for foreign cars went up, adding that in recent days, he has apparently pushed his team to be more aggressive and to plans to hit a broader set of countries with tariffs. Now, that runs counter to reports last week that the White House planned to zero in on a targeted set of nations. Futures on Monday pointed to opening losses for U.S. stock indices. They fell in Europe and also in Asia on Monday, including in Japan, where there is a clear fear of the potential impact on Japanese car exporters. And, of course, investors moved to U.S. government bonds and gold, according to Wall Street Journal. Broadly, exuberance about deregulation and tax cuts have given way to fear that Trump's trade policy could drive the economy into recession, putting the S&P 500 on track for its biggest quarterly loss since the fall of 2022, the Wall Street Journal said, adding that Goldman Sachs said now it sees a 35 percent chance of a U.S. recession, echoing similar warnings from JPMorgan and Moody's. Oil prices, meanwhile, are edging up further. After Donald Trump suggested that the U.S. could impose secondary tariffs on Russia, a top three producer nation and major exporter to the world, according to Bloomberg. Secondary tariffs would mean that countries who consume Russian oil, for example, could be hit with tariffs, and that includes, obviously, countries like India.
Crude is sitting around $74 a barrel now. On Sunday, Bloomberg quoted NBC News saying that Trump was very angry at Vladimir Putin and would consider secondary tariffs on Russia's oil exports. He later told reporters on Air Force One that he didn't think the Russian president would go back on his word, which appeared to take some of the edge off his earlier criticism, according to Bloomberg.
Meanwhile, back home, there is a sense that India is mostly now clear on what it will do and will not, and will spend some time on that shortly, and the markets should and perhaps have already discounted that to some, if not a large extent, maybe except in areas like auto components where the impact may be a little higher.
Bank Credit Slows Down
Loan growth at Indian banks has now moderated for the eighth straight month in February, according to data from the Reserve Bank released on Thursday, thanks to a drop in personal and credit card loans following tighter restrictions by the Reserve Bank of India for more than a year now. The data showed that banks' credit increased by 12% year-on-year last month, slower than the 16.6% or close to 17% rise a year earlier, excluding the impact of HDFC Bank's merger with Parent Housing Development Finance Corporation, Now, credit card spends have dropped to a seven-month low of about Rs 167,000 crore or Rs 1.67 trillion in February, according to the latest data. In January, those expenditures stood at about Rs 1.84 trillion. Point-of-sale transactions for the month were also down to about Rs 62,000 crore from about Rs 69,000 crore in Jan 2025. E-commerce payments have also fallen slightly to about Rs 1.05 trillion from Rs 1.15 trillion in the previous month. An analyst told Business Standard Newspaper that over the past few months, stress and unsecured lending has increased.
Household debt is rising at an aggregate level, making the Reserve Bank of India uncomfortable, which could have led to a drop in credit card issuances and credit card spending. There is also a shift in spending patterns amongst customers amidst that rising household debt. Now, India's banking sector has seen rapid loan growth for several years, thanks to retail demand, a lot of it for unsecured loans, and in late 2023, a concerned Reserve Bank slapped stricter capital requirements on personal loans, credit card loans, as well as credit to non-bank finance companies.
Banks then reduced their lending to optimise their credit deposit ratio, a key liquidity metric, even as they tried to raise more deposits. As a result, loan growth has slowed sharply in recent months, with personal and credit card loans particularly affected. Now, of course, the approach has changed.
Right now, the Reserve Bank has relaxed its capital requirement rule last month, marking a significant shift since Sanjay Malhotra took over as Governor in December. Although analysts expect the change to positively impact the economy, they say that the effect will only become apparent in a few months. But remember, we've got another rate cut coming this month, possibly about 25 basis points, all of which is being anticipated to do good to the economy and create a sense of more liquidity.
And if you were interested, the total number of outstanding credit cards in the system is currently about 109 million. That's 109 million credit cards, which is slightly higher than what it was in January. India's largest credit card issuer is HDFC Bank, with about 23 million cards in circulation.
State Bank of India has about 20 million, ICICI 18 and Axis Bank 14, roughly.
Which Way Will Tariffs Go?
Tomorrow is April 2nd, or Liberation Day, as Donald Trump has called it. Indian trade officials have been working furiously to hammer out deals which will protect farmers and agriculture and maybe give away a few things elsewhere. Bloomberg reported that India was considering lower duties on pecan pulses and non-genetically modified soya beans as well as dried distilled grains soluble, a by-product of ethanol production used in animal feed, people who spoke to Bloomberg said. India is also seeking greater access for its grapes and organic farm products in the American market.
India imported about $32 billion of agriculture and related products from around the world in 23-24, according to trade ministry figures, including about $1.5 billion from the United States. Bloomberg added that while the figure has grown over the years, it remains modest by comparison with countries like China, which imports much more. Vegetable oil accounts for a lot of that global figure's rise.
India imports about 60% of its vegetable oil needs, as we've been documenting on the Core Report, and currently buys soya bean and canola oils derived from GM crops. Now there are several combinations of line items and after a point it becomes quite unnecessarily speculative on what items could get hit, but the broad ones that we've been talking to are quite clear that India will clearly give in on areas like whisky and superbikes and has already given in on the Google tax that we've talked about or that 6% levy. Now anything to do with agriculture and dairy in India is a no-no and Indian trade officials are and perhaps will resist tooth and nail.
The rest, well, is open season. But how bad could it be and which way could things go? Several economists including MK Capital's Madhvi Arora have been working on stress test reports.
So I reached out to her and I began by asking her to walk us through the key points in a report she's just put out and also talk about how she was seeing the way out for India as an economist.
INTERVIEW TRANSCRIPT
Madhavi Arora: So I'll just quickly first run through how we have done this assessment. As you rightly mentioned there are three ways in which the tariffs could be imposed. It's still very sketchy at this point in time, very unclear as to how the final implementation is going to be and just to add to the point, April 2nd may not be the resolution of any kind of tariff opposition but actually we believe it will be a second leg of the war which will get extended.
So on a broad country level what US would do is that, you know, if they're not very well prepared in terms of their homework they can just put a relatively simpler way of sort of imposing tariff would be put a broad country level tariff or whatever difference their country is putting on them they would put a differential tariff on the same which for India is most damaging on paper in terms of, you know, its delta with the US because India after Korea is one of the highest tariff opposition countries in the US.
So on paper it looks to be massively hit but when we get into the details of that we realise that, you know, India's market is quite concentrated for US per se sectorally it may not be as impacted and second way of course you can do is that you can go on sector and sector basis and see, you know, which sector have a differential with higher differential of US with respect to country and then accordingly they will probably tariff the country in the same order which is very complex but they have done that in recent past like for steel sector for auto sector very recently but they still have very very vague in terms of imposition so we don't know how it really play out but sector level if we get into the details of the what we realise is that between broad country level and broad sector level there will be some mix that will be played out assuming they do a broad country level tariff India would not be as big a hit per se on numbers even though on paper we look to be a big hit we export roughly 2% of our GDP worth of export to the US of which our study suggests that the actual vulnerable sectors basically just about 1.1% of GDP so on net basis the broad country level tariff would probably lead to a export loss of around 6 billion for India from the US market which is around 0.12% of GDP off with the sectors that we have established in our thesis and which we think are far better place than peered are auto pharma electronics but at the same time there's you know some labour intense sectors like apparel and gender and jewellery which may not have much escape routes so I think these two sectors are much more valuable to the whole tariff war but I think there are a lot of if you go to the nuances of auto pharma electronic sector you'll actually find that there are escape routes in with which we may not be as badly hit as markets are fearing
Govindraj Ethiraj: at this point in time right so in the case of electronics you're arguing that basically this would really mean a bigger hit on US consumers so chances of a high tariff are low and the second is pharmaceuticals which of course the industry has also been telling us that it's too sensitive for them to increase tariffs and on the other hand it's interesting to note that one of the things that we are exporting to the US is nuclear reactors and parts is that what you know
Madhavi Arora: no it's basically all machinery this is the code that they had put in the HS category but it's actually all kind of machineries not just nuclear machineries
Govindraj Ethiraj: okay but anyway it's interesting to note that we are exporting nuclear reactors or some parts of it to the United States yeah the parts of it yeah it's mostly machinery assets so let me ask you a slightly broader question Madhi so as an economist when you look at what or rather where we are because I'm assuming we don't usually look at this we don't look at where Indian exports stand on a competitive basis and we don't usually go line by line and say okay where do Indian apparel stand versus California almonds or whatever it is so what is it that we should be doing as a country that's one and secondly as enterprises or as sectors as you look ahead to become more competitive
Madhavi Arora: See if you look at the last trade war that happened in 2017-18 India technically did not gain anything out of that because the China plus one narrative which played out it was purely retorting nobody lost in the China plus one thesis where in China actually gained global market share they increased their export share they increased their value added in the global export chain they shifted their trade dynamics away from US to ASEAN and even LATAM and even Russia for that matter they moved their export base in a way that you know they can find some leeways to reduce the tariff pain by doing FDIs in other countries so a lot of rerouting of exports happened and plus they also became much more tech orientated so they moved their product basket dramatically you know for instance the likes of EVs lithium-ion battery cells and even the regular cars all of that for less than one two percent of China's trade basket which became almost 10 percent so they had done a massive reshuffling of their trade order in order to not lose their market share and eventually the likes of ASEANs who were part of this whole China plus one chain where FDIs of China happened in the likes of Thailand, Philippines, Vietnam became a very big player in low-end Chinese shift of market share India did not gain anything in that you know we were not part of the China plus one pack in fact the places where we actually gained were not even close to where the places where China vacated the market share even in the low-end categories so I think we missed the last chain this time it will be much more dynamic play because everybody will be targeted not just the China in this time around right so every country is going to be targeted I think there will be eventually differential targeting approach that the U.S. will adopt but that said I think we as of now won't really have a great manufacturing capacity to really compete in case China further leaves the low-end capacity industries other countries try to sort of leave it on that that said I think somewhere we still have opportunities we started innovating a lot in textile sector where we lost the best last time we are focussing a lot you know on non-apparel textiles that we can capture market gain in that electronics again we have done a bit of assembling led expansion but we still have a long way to go to be a part of the value chain in a more dramatic fashion I think as of now the focus of policymakers has to be to ensure that we get a good bargaining from the west because everybody's going to be doing the same shit which is basically trying to expand the manufacturing base during the U.S. right if everybody starts producing we're gonna consume so in this mess the best way is to be geopolitically very strategic of course keep working on improving your low-end manufacturing base where the employment is much higher so at least you take care of the employment of low-end segments of the economy but at the same time you need to be strategically much more well positioned to not lose what you have at this point in time it'll be difficult for you to get or improve your relationship with China without disturbing that to the U.S. so last time we did not participate in China plus one this time they were until last year there were even talks within the government of India that should we open up India to China's FDI there are debates that happened to that we really could have probably gained along with China plus one it had we participated in the FDI diversification of China so it'll be very difficult I mean at this point in time we haven't done much in terms of really capturing a market share if China loses any kind of space in the low-end basket I think we still have a long way to go policymakers will have to keep focussing on ensuring that manufacturing from the low-end to the mid-segment continues and I think R&D is one segment where China has shown that that can really change the landscape of an economy this is what did it last five years I I think we need to also start focussing on R&D because that's one segment which we purely import in the rest of the world, a long way to go but at least the intent has to be right.
Govindraj Ethiraj: Madhavi, thank you so much for joining me
Visa Fees Are Rising Getting
visas is of course becoming tougher but prices are going up too. Remember when you pay for the processing of a visa like a tourist visa it does not mean that you will get one business standard is reporting that visa fees could go up by almost 13 percent from today for the United Kingdom Australia and the European Union and this will also include tuition fees for international applications the increases affect a wide range of categories from short-term visitor visas to work sponsorships to long-term university courses for Indians planning to visit abroad or to work and study the details I'm sure can be found on the respective consular sites.
Bracing For Hot Weather
India is expected to experience a much hotter April with above. Normal temperatures across most of the country India's director general of meteorology at the Indian meteorological department told an online news conference on Monday the prediction follows a warmer than normal March raising the risk of some damage to wheat crops that are being harvested now according to Reuters now India is also set for a record peak electricity demand this summer and preparations are underway to ensure existing capacity is running fully like last year peak power demand is seen rising to 270 gigawatts this year beating the previous all-time high of 250 gigawatts last year according to government estimates quoted by Bloomberg the use of diesel fire generators for example could also increase as some areas face blackouts I reached out to Aditya Pillai a member of the technical advisory group on heat wave mitigation to the national disaster management authority or NDMA government of India and also visiting fellow at the sustainable futures collaborative and a doctoral researcher at King's College London I began by asking him how India was gearing up or should be gearing up for heat mitigation measures and the role of private and government sectors in doing.
INTERVIEW TRANSCRIPT
Aditya Valiathan Pillai: So let me start with the state right I think starting with government is probably the right place to go and then let's move to businesses and people so one of the things we realise we went to nine states covered 11 percent of India's urban population and these are some of the most sort of vulnerable cities but they're also engines of Indian growth what we realised is the flame along which heat action is taking place is very much short-term right so what the idea right now is let's prevent the loss of lives so let's distribute short-term emergency directives in a way that just before heat wave or during a heat wave people are able to access those and don't die right which is fine it's reactive it's disaster management it is necessary but the problem with heat is it is a multi-sectoral problem and it requires sort of combined action across multiple departments and that is a very complex government challenge right so you need things like the greening of the city so the large budgets that are now allocated towards greening you need to make sure that that is happening in urban heat islands for example right you need to make sure that your distribution system of your electricity grid is done in such a way that it's able to handle the extremes of a heat wave and also the load that comes from cooling you need to make sure your poorest and most vulnerable have access to cooling up these are all things that go well beyond the immediate idea of distributing ORS and pani at the street side right it's a much more complex governance challenge and then you get to the third order difficulty which is how are our cities even being structured right we have immense amounts of urban density we have immense amounts of concentration trapping of heat especially in slums and informal neighbourhoods where people who do heat exposed jobs also live so it's a double whammy you're going out you're working for nine ten hours a day you come back and you're still being heat your home and your neighbourhood is hot so in terms of governance our single biggest recommendation is think long term right global warming is coming this is going to get worse you need to start thinking about all of these different sectors working together in order to reduce the heat stress conditions it is a much bigger governance challenge than just making sure that the health system is functioning correctly it's a much much more complex governance so that's the state move from short term to long term that requires more coordination more money and more thinking right it needs a strategy india really needs a strategy to deal with future heat up to businesses there are a couple of things that are very important right we actually found that in a very decentralised very organic way businesses are making a difference because some of it is csr money and it's being put into things that have an effect on heat resilience on the ground such as planting trees for example that is a sort of favourite sort of csr activity making sure cooling centres are available to people during a heat wave we had multiple sort of points of evidence it suggested the businesses were taking this seriously but go and i have to say the big ticket items that can increase heat resilience really revolve around protecting workers right and this is as much a human rights issue as it is a productivity issue and it is very important to make sure that there is adequate care given for the hazardous conditions that labour will now be forced to enter as the climate warms if we want the economy to keep functioning we need to have protections that make sure that we don't see tragedies and we don't see all these dire predictions of the loss of indian productivity taking place right so for example the ilo has a report that says the equivalent of 34 million jobs will be lost by 2030 i just want to say this is equivalent of not that we will lose 34 million jobs but we will lose the productivity equivalent of 34 million jobs by 2030 you have to build the protections make sure that people get the breaks they need make sure they have insurance parametric insurance is being tried out right now to make sure that people are compensated for loss labour make sure they have access to cooling centres make sure that there are inspections especially in formal sector places where inspections can take place so there's a whole bunch of things that need to happen with businesses that allow us to have a relatively predictable trajectory going into the next couple of decades through increased warming
Govindraj Ethiraj: Right aditya we've run out of time. thank you so much for joining me
