Markets Take A Dive, Political Uncertainty A Key Factor
Stock markets are experiencing heightened jitteriness, mostly transmitted by the ruling BJP party's own jitteriness, possibly because it was not confident of hitting the stretched target of 400 seats it had set for itself
Our Top Reports For Today
- (00:00) Stories Of The Day
- (00:50) Markets take a dive, political uncertainty a key factor
- (05:08) Why market volatility even at current levels is still low.
- (07:35) Luxury homes are selling out barely as they are announced, office rentals are rising
- (09:50) How the Tatas have inherited a full blown union problem after decades
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 Take A Dive, How Far?
It has been evident for the last few days that the stock markets are experiencing heightened jitteriness, mostly transmitted by the ruling BJP party’s own jitteriness, possibly because it was not confident of hitting the stretched target of 400 seats it had set for itself.
The BJP may still hit that mark or come close but the journey of the last mile or the next three weeks or so was bound to be accompanied with apprehension either way, as we have been discussing on The Core Report.
On Thursday, the stock markets took a dive with markets or the Sensex ending 1062 points lower at 72,404.
The Nifty50, too, settled below the crucial 22,000-mark at 21,958, down 345 points.
The benchmarks logged their worst session since January 23
The broader markets were weaker, expectedly, with the BSE MidCap index declined 2 per cent, and the BSE SmallCap index erased 2.4 per cent.
India's volatility gauge, the India VIX has now reached its 52-week high at near 19, reflecting the fear or apprehension in the market and also the highest since October 2022.
This is the fifth straight day of sell-off for the headline indices.
There are of course other reasons including the fact that Q4 results have been a mixed bag and foreign institutional investors were selling.
Though FIIs have sold before too but not triggered such a fall.
The current mood is clearly political and will be, with ups and downs till June 4, making it a difficult market to call and also a little difficult to say which way things will go
Jittery as they are, the good news is that domestic flows are strong as Birla Sun Life AMC CEO A Balasubramanian told me in an exclusive interview with some very insightful data that will play out over the weekend. And an extract of that is coming up shortly.
Elsewhere, the State Bank of India surprised the markets with a 24 per cent year-on-year (Y-o-Y) growth in net profits to Rs 20,698.35 crore, on the back of higher interest income and low provisions.
The number beat analysts' estimates by a wide margin, who had pegged PAT in the range of Rs 10,432 crore to Rs 14,743 crore.
The stock was up close to 4% in a falling market.
Oil has risen again, now to $84 a barrel, though it has been on a downtrend since April, posting losses in three of the past four weeks, with weakness in processing margins too, Bloomberg reported adding that the decline has come as much of the geopolitical premium from tensions in the Middle East has unwound, bringing traders’ focus back to a cooling market.
Meanwhile, refiners in India BPCL and HPCL reported between 35% and 25% lower profits as refining margins fell, thanks to higher oil prices.
Elsewhere, in the region, China’s exports rose slightly more than expected in April even as its imports surged.
Exports increased 1.5% in dollar terms from a year earlier, reversing a drop in March the customs administration said Thursday.
That left a trade surplus of $72.4 billion, yes, it's a surplus, for the month. India’s trade deficit for March, which was lower, was over $15 billion.
Meanwhile, countries are complaining against China about its overcapacity which is hurting factories elsewhere, notably in the electric vehicle space.
The groundswell of complaints about China’s factory output keeps getting louder, but there’s no sign Beijing is ready for fixes that might backfire on its vulnerable economy, Bloomberg reported adding that this week European Union leaders, who are threatening tariffs on electric cars, were the latest to scold China about overcapacity.
China has responded by saying the Chinese industry is competitive thanks to innovation, not subsidies.
How to Play Volatility
Now to return to the markets, Birla Sun Life has nearly Rs 3.4 lakh crore of assets under management and over 8.5 million investors.
Its MD and CEO A Balasubramanian has worked with the fund in various positions for almost 3 decades and I asked him, among other things, by leaning back on his experience over the decades, how investors should respond to volatility, including of the kind we are seeing right now.
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The full interview with Balasubramanian will play out over the weekend on The Core Report Weekend Edition on Saturday.
Real Estate Stays Hot
Elections or no elections, real estate is continuing to pull in investments. Non-resident Indians are continuing to swamp new projects and project launches, upto almost 25% of total demand.
DLF Limited has said that its latest luxury project, DLF Privana West, located in Gurgaon near Delhi, with 795 apartments valued at approximately Rs 5590 crore has sold out entirely within just three days.
In January this year, DLF sold 1,113 luxury apartments in Gurugram for Rs 7,200 crore within three days of the launch of its project 'DLF Privana South', which is spread over 25-acre.
Business Standard said brokers it spoke to quoted a price range of Rs 6.43 to Rs 7.15 crore for a 4 BHK measuring 3577 sq. ft and penthouse and measuring 5472 sq ft, respectively.
Speaking of high prices, a new report by Colliers has said that occupiers in the Asia Pacific region are prepared to pay higher rentals for superior-quality offices.
Which is a general fact I guess but the report says Global Capability Centers (GCCs) are driving India's office space demand, holding a 37% share in overall leasing activity for Q1 2024.
Within which Bengaluru and Hyderabad collectively drove office market activity. They accounted for around half of leasing and three-fourths of the supply in Q1 2024. Rental rates surged by up to 8% year-on-year across key markets.
After a decline during the pandemic due to low demand, occupier exits, and remote work trends, rentals have surged in 2024, surpassing pre-pandemic levels, Colliers said in a report quoted by Business Standard.
India's strong office market performance is attributed to robust economic growth and renewed occupier confidence.
Air India Express Sends Out Termination Letters
Air India Express, owned by the Tata Group, stayed in the news on Thursday for all the wrong reasons after it said it cancelled 85 of its flights today and was making "every possible effort to minimise the inconvenience".
In a statement, the airline's spokesperson said that it would be operating 283 flights yesterday and Air India would support it on some routes.
"However, 85 of our flights are cancelled and we urge our guests booked to fly with us to check if their flight is affected by the disruption before heading to the airport."
Meanwhile, the airline late on Wednesday removed around 30 employees for going on a mass "sick leave".
The airline has also given other members an ultimatum to either return to work by 4 pm on Thursday or face termination.
Not surprisingly, the termination letter or a part of it was circulating on social media on Wednesday evening which alluded to the pre-meditated and concerted abstention from work without any justifiable reason.
The larger issue is that the Tatas are facing union troubles decades after their last encounter, perhaps in Tata Motors then Telco in the early 1990s when Ratan Tata took on the unions.
Ratan Tata is not actively running Air India so the problem is for the frontline managers to battle and grapple.
Air India itself appears to be carrying all the baggage that was responsible in many ways for the mess that it saw itself in leading eventually to its going on the block.
The Tatas appear to have no choice but to go firm and not make the mistakes the Government made in the early days.
I reached out to Sanjay Lazar, aviation consultant and Air India inflight veteran who worked with the airline for over three decades and began by asking him what was driving the unions’ actions this time.
