Markets Edge Down with Selling In Consumer Stocks
Wednesday was a choppy session in the markets, with the indices spending the early part of the day in the positive and then sliding down
On Episode 500 of The Core Report, financial journalist Govindraj Ethiraj talks to Rajesh Nambiar, president of Nasscom (National Association of Software and Service Companies) as well as Rahul Mehta, Chief Mentor of the CMAI (Clothing Manufacturers Association of India).
(00:00) Stories of the Day
(01:29) Markets edge down with selling in consumer stocks
(02:07) Gold prices hit record highs on global trade uncertainty
(05:43) How India’s IT industry looks at DeepSeek and the potential
(18:39) India to review and potentially lower import duties on 32 items coming to the US…will Tesla get its pound of flesh now?
(20:16) Now Kia Motors gets slapped with a hefty tax notice for misdeclaring imports
(21:50) What Indian apparel manufacturers can and cannot do in a global trade war
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 Thursday, the 6th of February and this is Govindraj Ethiraj, headquartered and broadcasting and streaming like always from Mumbai, India’s financial capital.
This is our 500th episode today and I on behalf of the podcast team including Joshua, Yash, Richa and Shiva thank you for listening in and staying tuned and more importantly for all your wonderful feedback that you have been sending us which only helps us to do better every day.
Top stories
Markets edge down as selling in consumer stocks.
Gold prices hit record highs on global trade uncertainty.
How India’s IT industry looks at DeepSeek and the potential.
What Indian apparel manufacturers can and cannot do in a global trade war.
Now Kia Motors gets slapped with a hefty tax notice for misdeclaring imports.
India to review and potentially lower import duties on 32 items coming to the US…will Tesla get its pound of flesh now ?
Markets Edge Down
Wednesday was a choppy session in the markets, with the indices spending the early part of the day in the positive and then sliding down.
The BSE Sensex was down 312.53 points to settle at 78,271.28 while the NSE Nifty50 was down 42.95 points at 23,696.30.
The broader markets outperformed the Nifty and Sensex, with the Nifty Smallcap100 index ending higher by 1.85 per cent while the Nifty Midcap100 index settled with gains of 0.68 per cent.
If you were looking for some silver linings of a continuing positive undertone and there seems to be a slight one still, this is it.
Gold Prices
India's gold consumption in 2025 is set to cool from 2024’s nine-year peak thanks to a rally that has taken prices to record highs, the World Gold Council (WGC) said on Wednesday.
Demand for gold could stand between 700 metric tonnes and 800 metric tonnes, compared to last year's 802.8 tonnes, which was the highest since 2015, WGC officials told Reuters.
India gold prices hit a record high of Rs 84,399 ($968.62) per 10 grams on Wednesday. They have risen 10 per cent so far in 2025 after rising more than 21 per cent in 2024.
International gold prices hit a fresh all-time high at $2,869.68 an ounce aided in part by the pullback in the dollar and Treasury yields.
Meanwhile, in other markets, Chinese markets returned from a week-long break for the Lunar New Year holidays.
China has, so far, put out a limited response to US tariffs of an additional 10% on Chinese exports, announcing duties that would cover just $14 billion of U.S. exports.
The room for negotiation is still there.
The dollar has weakened somewhat against the Euro and the Canadian dollar, in focus because of the threat of tariffs that still hang, though now delayed by a month.
Oil Prices
Oil prices are broadly searching for direction since not much has changed on the demand and supply front while everything has changed on the tariff and trade front.
Oil prices dropped on Wednesday on rising U.S. stockpiles and concern about a new Sino-U.S. trade war fuelled fears of weaker economic growth.
U.S. President Donald Trump has pushed to eliminate Iranian crude exports so that could send up prices potentially.
Brent crude futures were down 92 cents, or 1.21%, at $75.28 a barrel.
China has announced tariffs on U.S. imports of oil, liquefied natural gas and coal in retaliation for U.S. levies on Chinese exports.
"The oil market is now caught between increasing fears that an escalating trade war will damage global oil demand growth on the one hand and possible sudden disruption of Iranian oil export," analysts told Reuters.
Tehran's oil exports brought in $53 billion in 2023 and $54 billion a year earlier, according to U.S. Energy Information Administration estimates. Output during 2024 was running at its highest level since 2018, based on OPEC data.
Trump drove Iran's oil exports to near zero during part of his first term after re-imposing sanctions
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The Impact of DeepSeek on India
It is perhaps propitious that Sam Altman, founder of ChatGPT, launched in November 2022, is visiting India, possibly drumming up support for his AI model and also to assuage concerns, given the increasing number of lawsuits against it.
An Indian newswire has joined the flurry of lawsuits in many countries that allege OpenAI has illegally used copyrighted content to train the algorithms that power its popular chatbots.
And then came DeepSeek, the Chinese frugal answer to ChatGPT launched apparently at a cost of just $6 million and just a few weeks ago has kicked up a storm in the global technology community leading to among other things, stocks of the major tech companies including chip maker Nvidia taking a battering.
The big question for India is if an AI Model like DeepSeek which is opensource is available at much lower cost and easily accessible, then how does that change the dynamics for India’s IT industry and the potential users of AI technology.
I reached out to Rajesh Nambiar, now president of IT industry body National Association of Software and Service Companies or Nasscom and earlier MD & CEO of Cognizant Technology Solutions India and began by asking him how he was seeing the impact of DeepSeek now that we had a few days to digest its arrival.
INTERVIEW TRANSCRIPT
Rajesh Nambiar: Well, it's certainly it's very very early days. The emergence of DeepSeek, especially the R1, you know there are version 3 and then this also out of R1, it's really a strong reminder that AI innovation is no longer monopolised by a handful of tech companies right and that's what we saw over the period of time despite all the chip bans and export controls etc and also being a private Chinese company there is no question that this certainly a remarkable achievement from the DeepSeek side and I believe that the rapid strides in AI research and the ability to build you know highly competitive LLMs without massive GPU dependencies, that's what we saw, this totally disrupts the assumption that high compute costs are defining the, it will continue to be defining factor in the AI leadership right. This challenges of course the existence of AI hierarchy as we saw and this signals the rise of new power centres in AI development and I believe that if at all it teaches us two broad things. One of course is open systems will certainly outperform closed systems in AI specifically.
Second one I believe Govind is the constraints can be very very useful right. So engineers tend to actually operate best under constraints. So in my mind these two are the useful lessons for us to take in some sense.
Govindraj Ethiraj: As an India strategy what do you think we should be, I mean we've been talking about now or rather there has been a debate about you know should we create our own large language models or just build upon other people's large language models. Where do you feel we should be or which direction do you feel we should be headed in?
Rajesh Nambiar: Oftentimes it's not necessarily one or the other. I think it's kind of both a little bit and I can talk about it a little bit. But let's look at what really was the takeaway if you may from the DeepSeek experience right.
They really used a different approach to train it's especially our own models which is used to sort of by open AI for example with contrast from the open AI method. The training actually involves less time obviously fewer AI accelerators as we saw and certainly less cost to develop. So they used this model called reinforcement learning which basically means that DeepSeek you know they used a large scale reinforcement learning approach focused on sort of reasoning tasks and so on so forth.
And also they used very efficient knowledge transfer techniques and their research has successfully compressed capabilities into surprisingly models as small as like 1.5 billion parameters. Others are all way way high in terms of how they use and then of course this notion of what they call mixture of experts or something that they call that architecture also certainly made a big difference. So for India to your question I certainly believe that this is an opportunity and probably also a wake-up call in some sense right because it reinforces the need for self-reliance and AI infrastructure certainly talent development of course and more importantly open source collaboration which is I believe is one of the foundations as we discussed earlier.
Our government has already laid out plans you know especially with the recent announcement setting up a massive AI infrastructure with the part of the AI mission including a facility of 18,000 GPUs and hardware infrastructure that is sort of the heart of creating AI essentially to build a homegrown AI systems that understands India's very unique challenge unique cultural nuances and of course the needs of our country and I believe that we also heard that from the finance minister's budget speech announcing substantial increase of allocation towards AI mission you know it was about 173 crores even though 400 crores are allocated. Last year to this year it will be about 2,000 crores of course much of this is expected to go towards building LLMs along with setting up of centres of excellence as you saw that in the budget speech as well all of that. Now coming to what we should really do LLMs versus application development as some folks would say I think the competition is not just about being who creates better chatbots or agents or AI systems I think these are merely tools and probably different steps to an ultimate goal the real objective is of course achieving the advanced AI AGI etc that can really match or surpass the human performance across various domains right. So when that level of capability is reached it will lead to profound and widespread disruptions across industries and and we are getting very very close to that reality in some sense. I believe that LLMs alone don't create value unless they translate into real world product and services you know you looked at for instance the AI mission in India they have multiple approaches starting from compute to application challenges safe and trusted tools foundational model creation you know which is what was called innovation centre and of course skilling and apart from many other objectives that they had. So the sweet spot is going to be a little bit of a dual pronged approach as I said before developing a little bit India centric not necessarily India based LLMs but India centric LLMs while aggressively integrating this AI into our enterprise startup public sector ecosystems and so on. This will of course ensure that AI does not remain as an isolated research endeavour but certainly translates into tangible lack of progress.
So it's a bit of both in my mind.
Govindraj Ethiraj: Right so let me ask you the enterprise question so given now that we've seen DeepSeek and it's clearly or seemingly much lower resource call what does that mean for enterprises who have been thinking about integrating AI for business outcomes assuming that business outcomes are now much clearer in terms of what they could have done with AI would they be able to do more or will they still have to be I mean do they still have to get clarity on what business outcomes do they actually want to achieve?
Rajesh Nambiar: If you start from the problem statement and work backwards I think it'll be more useful right otherwise people will jump onto this as a tonne of the technology tool and then they may not end up where we really want these enterprises to do. Certainly the open source nature of DeepSeek's model will present a very very unique chance for Indian developers certainly innovate and create very indigenous AI solutions right and the open source nature of DeepSeek truly fosters collaboration and innovation so obviously building on its model creates a sort of the virtuous cycle of improvements and adaption very stark contrast to the proprietary models of many western companies that we saw in the last whatever number of months and couple of years if you may but you know DeepSeek just doesn't stop at building a massive you know so they built a 671 billion parameter model it also created smaller what they call distilled versions as I said before smaller models that can run on a laptop or as some sort of a basic hardware this makes very very big sense for for our own startups and small businesses and individuals in India who don't have access to that expensive infrastructure so unlike many other AI models that focusses on processing data DeepSeek R1 also prioritises accuracy and reliability in tasks like math science and coding etc which are very relevant to our businesses for our businesses needing high stake results this trade-off is very very invaluable I mean I believe that for Indian startups where resources are often limited but ambitious are very sky high you know and this can become a certainly a game changer startups can integrate this R1 into their products without worrying about hefty costs they need to pay the API costs they need to end up paying I definitely believe that this opens doors to creating AI powered applications you know across all segments whether it's health care education certainly fintech and other even some sort of rural development I believe this can certainly make a difference.
Govindraj Ethiraj: So what you're saying is that the transformative power of AI which may have been visualised earlier is more likely to be actioned now because it's clearly become more accessible and purely from a cost and resources point of view at least at this point.
Rajesh Nambiar: Definitely and as we saw the Indian AI adoption is actually moving from you know it used to be very exploratory in nature in many ways it will now slowly move to the execution mode where companies no longer just experiment with AI but they're actively integrating into the business operation that's where you see the value right customer experience decision making stuff you're able to deploy some of this I think we'll start to see the value.
Govindraj Ethiraj: A question on open source now open source we've seen open source over the years decades actually in various software counterparts or softwares now what's your sense on open source in general having used open source or not used open source I'm sure there are reasons for both and therefore how would you see deep seek in the open source context or open source in the deep seek context?
Rajesh Nambiar: I think the open source was sweeter in many ways and I believe that the strong open source ecosystem has laid the groundwork for companies to develop what I call homegrown AI solutions tailored to both local as well as global needs right but having said that this journey cannot be undertaken in isolation and we should be building a collaborative AI ecosystem one that integrates of course investment in R&D which we should do a lot more investment in infrastructure and AI expertise with India's established technological strength and this is going to be very critical for us to truly leverage
Govindraj Ethiraj: the open source ecosystem that we mentioned and conceptually you feel that open source is a good way to go I mean it works but it also works with some boundaries isn't it it is true but I think
Rajesh Nambiar: now we are talking about open source which are not necessarily sort of the the base model of open source itself but a little bit of a constraints around open source so these are not kind of open source that in some parts of the ecosystem we experience but I believe that you know even in some of the models I won't name them but even from the western world it's not if the thing is true there are one or two models which are open source as well quite honestly I think even deep seek actually use some of the open source available model train fundamentally how they even came to where they are but that helps I mean open source helps everyone and the more you use the more it gets benefited and you're putting more and more into the ecosystem by which everybody benefits the users as well as people who are creating these open source models.
Govindraj Ethiraj: Right now this last question so what was your first reaction when you heard or maybe experienced deep seek what did you think? I just couldn't compliment them. So you believed it and then you felt oh I mean you but did you believe it I mean was there still shock and surprise?
Rajesh Nambiar: There was a little bit of a scepticism I must say for the first 24 hours or so to say that is it real is it is it exactly what they even today for example you know a lot of people question whether the cost at which they actually implemented is real or not is that some way they would have gotten some help from the government etc to make what they did certainly I mean because it is a phenomenal achievement as I mentioned before with so much of constraints and so much of constraints put around them whether it is the access to real compute power access to certain chips the restriction that the US government imposed on China and so on so forth so it is a little bit of unbelievable but at the same time now we know that it is for real certainly I think there's enough amount of testing which is done on this shows that this is something which all of us should leverage and I have seen including our own broader advocacy groups and we're looking at deep seek very very seriously I think they've certainly come off all of those initial scepticism which came about the moment it was announced I believe it's a phenomenal achievement by just talking.
Govindraj Ethiraj: Rajesh thank you so much for joining me.
Rajesh Nambiar: Thank you Govind really appreciate it.
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Meanwhile, India's finance ministry has asked its employees to avoid using AI tools including ChatGPT and DeepSeek for official purposes, citing risks posed to confidentiality of government documents and data, an internal department advisory showed.
Countries like Australia and Italy have placed similar restrictions on the use of DeepSeek, citing data security risks.
Will This Be Elon Musk’s India Moment
There are many items manufactured or produced in the US that are seeking lower duties and could range from almonds to cars and bikes.
Trump in his previous term spoke of Harley Davidson bikes and they have already been given the benefit of lower import duties.
Last week, India slashed import duties on fully-built high-end motorcycles to 30%, in a move seen as designed to keep him happy. Remember he has called India a "tariff king".
But fully-assembled imported cars still attract a levy of more than 100%.
So will Tesla get a similar break since it wants to export into India without necessarily manufacturing right away as the policy would otherwise stipulate.
Obviously at a lower import duty.
With Elon Musk, Tesla founder, now virtually a part of the US Government and confidante of President Donald Trump, will he get what he wants?
Chances are high, it would seem.
India plans to review import tariffs on over 30 items, including luxury cars, solar cells and chemicals, a senior finance ministry official said, potentially leading to increased imports from the United States as global trade tensions grow, Reuters reported adding the move, aimed at reducing average tariffs, comes ahead of Prime Minister Narendra Modi's visit to the U.S. next week.
India imposes something called the Agriculture Infrastructure Development Cess (AIDC) and that could be lowered for US exports into India.
The list includes luxury cars, solar cells, yachts, sports vessels, devices used in building semiconductors, and other machinery, all of which have seen the government impose AIDC tariff of between 6.5% and 70% on imports, after reducing the basic customs duties, Reuters reported.
Not So Easy Doing Business
Meanwhile, in a case very similar to what Skoda India has faced which is not surprising because most tax demands follow a theme, South Korea's Kia has been accused of evading taxes of $155 million by misclassifying component imports.
Reuters which reported this story says the carmaker has denied wrongdoing. India is the world's third-largest auto market and Kia has a share of 6% of roughly 4 million units a year.
Volkswagen last week went to court over a tax demand for a record $1.4 billion in back taxes that it called "impossibly enormous".
The Kia notice apparently went in April 2024, flagging alleged tax evasion of 13.5 billion rupees, according to a government notice Reuters is reporting for the first time.
The offence centred on incorrect declaration of imports of components for the assembly of the carmaker's luxury Carnival minivan, the notice showed.
In a statement to Reuters, Kia India said it made "a detailed response, supported by comprehensive evidence and documentation to substantiate" its stand and the authorities were still reviewing the matter.
Kia may have to pay up to $310 million if it loses the dispute, or roughly double the amount evaded, due to penalty and interest.
The latest available corporate filings in India show Kia's domestic annual sales of $4.45 billion in fiscal 2022/23 were its highest ever, up 53% on the year, for net profit of $243 million.
Kia has deposited 2.78 billion rupees ($32 million) "under protest" as it continues to fight the Indian tax notice, which is still proceeding, said a government source who declined to be named as the matter is private.
India’s Apparel Industry in the China-US Trade War
India’s apparel industry has been fighting the challenges of scale for some time.
India is the 6th largest exporter of textiles and apparel in 2023 and exports between April and October or 7 months were around $21 billion.
The focus is obviously on the United States, to whom India’s exports have slipped behind China, Vietnam and Bangladesh.
Other countries like Indonesia and Cambodia are just behind India now.
While there are no tariffs imminent on India right now with trade wars between China and the US having started, how could India see this evolving situation in the context of opportunities and challenges.
I reached out to Rahul Mehta, Chief Mentor of the Clothing Manufacturers Association of India and asked him how he was seeing things even in this current state of flux?
INTERVIEW TRANSCRIPT
Rahul Mehta: See I think as of today at least as far as the exporting segment is concerned, the industry is certainly looking at a very bright opportunity not just from the tariff of US perspective but also the current unsettled conditions in Bangladesh. That is also drawing a few customers away from Bangladesh and looking at India as a possible alternative source. The problem is that both China and Bangladesh have specialised in very large quantities of production per style, per season etc.
And as of today frankly other than very very few exporters, India doesn't have the kind of capacity or the infrastructure to take real advantage of what the opportunity is providing. I have said in the past somewhat caustically that India never fails to miss the bus you know to catch the bus but again I think this is what is going to happen. The opportunity is there but I have a feeling that the countries like Vietnam, Cambodia etc.
are going to get a better advantage out of this and for talking particularly about the American tariffs, I think this is the first step towards buyers trying to near shore their sourcing. When I say near source, trying to source from countries which are closer to the US which gives them the dual advantage of a shorter lead time, b perhaps a lower freight cost. So I think these countries are going to get bigger advantage.
Having said that, I think those who are hoping that the tariffs will only sort of impact countries like China and Bangladesh, I think that's a misnomer because at some point of time Trump will have to carry through his threat to India also. I believe he has very good relations with the Prime Minister personally but he cannot make it too obvious that he will only punish China or only punish Canada but not touch India. So something or the other he will have to do.
Hopefully product categories where he levies the additional tariffs or the percentage of tariffs will not be too much.
Govindraj Ethiraj: Just to pick up on one of the points that you made, you said that China and Bangladesh have an advantage in large style manufacture of apparel. Can you explain that a little?
Rahul Mehta: See, historically Indian apparel industry was restricted to small scale. So it was the MSMEs which drove the India's export drive and that has remained unfortunately and relatively speaking okay. People have gone from 100 machine factories to 200 or 300 machine factories but our average factory size is still between 500 to 1,000 machines.
Whereas in Bangladesh or China, the average size could well be 5,000 to 10,000 machines. So that is where the crux of our limitation is exposed. For example, if I was an American buyer and I wanted 500,000 pieces of one particular style, in China or in Bangladesh, I might have to place the order on one or two or maximum three factories.
Here I would have to place the order on 30 factories. So that's where your irregularities, your inconsistencies, all these issues come up whilst dealing with India.
Govindraj Ethiraj: What stops today, I mean, I understand what you're saying is that we have a legacy problem here. We had licencing and therefore you could not expand in garment manufacture. But nothing stops us today from setting up this scale of plants, isn't it?
Rahul Mehta: Yes and I must say the government is doing its bit by introducing the PLI scheme, by introducing the mega parks. So the government is doing whatever it can but I think the major issue here is the lack of profitability in our industry. It will become more or less a commodity product and especially in apparel where we are really focussing on white label manufacturing.
We are manufacturing for our buyers labels. So there is no sort of uniqueness about what we have to offer except two or three advantages that we have, the knowledge of English language, comfort with technology. But the drive to really scale up our production, to set up 10,000 machine factories and so on.
That is missing because the fear that it is not really profitable, number one. And number two, you become too dependent on the Walmarts and the Primarks of the world. Indian business psychology is not to get too dependent on one or two single buyers.
So that's the other thing why we prefer to have more flexible, smaller production units rather than one huge factory.
Govindraj Ethiraj: What about other kinds of, let's say, garment or apparel, for example, higher value added, maybe in embroidery or maybe in sportswear or athleisure, which is a new trend. Are there more opportunities there or could there be more opportunities there?
Rahul Mehta: Unfortunately, you know, products like athleisure or sportswear or uniforms, these are largely focused on garments made out of multi MMF, the man-made fibres. Where we are traditionally weak, we have a very high cost structure, including the import duties. And therefore, we are not competitive in the world trade as far as garments made out of MMF fibres are concerned.
And most of these products are really made out of that fibre. And which is why I have been saying that, you know, people sometimes say that we need to broaden our market base and we are too focused on the US or the EU. In my opinion, you know, US and EU in any case form 50 to 60 percent of the world trade.
So you don't have much joy in trying to sell to a Columbia or an Australia or a New Zealand or whatever. But where we do need to look at, what we need to do is to broaden our product base because we are too dependent on cotton, let's say men's shirts or women's blouses and that too at the low to mid price points. But embroidery and value added products, yes, India has an advantage, especially over countries like Bangladesh and Vietnam or Cambodia.
I'm not even talking about China because I think that's gone to another orbit now. So we need to now look at more realistic competition. We certainly do have an advantage in these kind of value added products.
Govindraj Ethiraj: Right. Rahul, pleasure talking to you. Thank you so much for joining me.
Rahul Mehta: Thank you. Thank you.
