Markets Fall As Trump Party Hangover Sets In
The Trump victory party on Dalal Street lasted precisely a day
On Episode 429 of The Core Report, financial journalist Govindraj Ethiraj talks to Pushan Sharma, Director Research at CRISIL Market Intelligence and Analytics as well as Victor Vanya, Director & Co-Founder of EMA Solutions.
(00:00) The Take: Jet Airways
(05:29) Markets fall as Trump party hangover sets in
(07:06) Gold, copper prices fall sharply as the dollar strengthens further on Trump's victory
(08:28) Why potato, onion prices will stay higher for longer and keep food bills high
(19:15) What power consumption trends tell us about economic activity
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, its Friday, the 8th of November and this is Govindraj Ethiraj, headquartered and broadcasting and streaming
from Mumbai, India’s financial capital.
The Take: Jet Airways
https://www.thecore.in/opinion/jet-airways-assets-nclt-789101
Markets Crash
The Trump victory party on Dalal Street lasted precisely a day. Why the markets shot up so much in India was not clear at all to start with except of course the fact that they seemed to be keeping company with Wall Street.
But global markets including Wall Street were strong on Thursday overnight as well so clearly there was no fundamental reason for Indian stocks to rise as they did on Wednesday.
The BSE Sensex was down by 836.34 points at 79,541.79, while the Nifty 50 was at 24,199.35 falling 284.67 points.
Elsewhere, the easing of money continues. The Bank of England cut interest rates by 25 basis points Thursday to 4.75%.
It marks the central bank’s second such reduction this year, after it began its easing cycle in August, CNBC reported.
The Rupee & Dollar
The Indian rupee hit another lifetime low on Thursday as markets bet that a Trump victory would likely boost the dollar in coming months.
The rupee dipped to 84.29, inching past the previous all-time low of 84.28 hit on Wednesday.
The specific bet according to Reuters is that Trump's policies of tax cuts and deregulation are likely to lift U.S. growth, prompting investors to prefer the dollar to the other currencies.
On the other hand, the threat of tariffs, which Trump has promised to unleash, could undermine euro and Asian currencies.
Gold, Copper
The Trump wave impacted more markets.
Gold and copper plunged as Donald Trump reclaimed the White House, with a strong dollar putting pressure on commodity prices, Bloomberg reported.
Bullion fell the most since June and copper had the biggest drop since July 2022 on a closing basis and pushed the dollar up the most since 2020.
Gold had gained 4.2% or nearly $110 in October
Copper fell 4.5% during a broad selloff on the London Metal Exchange also tracking steep losses in the Chinese yuan.
Bloomberg said that along with the immediate impact of a weakening currency in the world’s top commodities consumer, traders are also bracing for a potential knock to demand if Trump follows through with pledges to deepen the US-China trade war.
And protection is of course good business for some.
Steel stocks jumped 13%, the biggest gain since March 2009 as a Trump administration would slap tariffs on steel imports from across the globe.
The Cost Of A Thali
Food prices are zooming again and that is driving up the cost of a food plate or thali in Indian homes
The reasons range from inclement weather to export curbs which disincentivize farmers from planting more onions.
On-year, the cost of home-cooked veg thali rose 20% and that of non-veg thali, after declining for 12 consecutive months, clocked a 5% increase in October:
The cost of the veg thali rose due to an increase in the prices of vegetables, which collectively account for ~40% of the thali cost
In October, prices of onion and potato rose 46% and 51% on-year, respectively, because of lower arrivals due to incessant
rainfall in September.
Prices of tomato more than doubled from Rs 29/kg in October 2023 to Rs 64/ kg in October 2024 due to September
rains that impacted arrivals from states such as Maharashtra, Karnataka and Andhra Pradesh due to crop damage and
festive demand.
Price of pulses, which account for 9% of the veg thali cost, rose 11% due to an 11% lower opening stock, a lower stock pipeline and
festive demand.
On the other hand, it could have been worse were it not for a 11% drop in fuel cost – from Rs 903 for a 14.2 kg LPG cylinder in Delhi in September last year to Rs 803 in March this year –
I reached out to Pushan Sharma, Director Research at Crisil Market Intelligence and Analytics and began by asking him to talk about the larger trends he was seeing prices when seen over the year and in contrast to the last year and also how he was seeing price trends in vegetables in coming months.
INTERVIEW TRANSCRIPT
Pushan Sharma: If you look at the trend over the last couple of years, in fact, the top concern on food inflation side is TOP, that is tomato, onion and potato. Now, if you look at retail onion prices, they averaged around Rs. 26 between August 22 to July 23.
And ever since August 23, they have not traded below Rs. 30. And in fact, they breached the Rs.
50 mark in September and October this year. And one major reason for this is that around 15% lower onion production took place in March this year. And that's for the Rabi season, which accounts for two-third of India's annual production.
Now, if you look at onion and where it is being produced in India, 75% of the production comes from four states, Maharashtra, Madhya Pradesh, Karnataka and Gujarat. And Maharashtra alone contributes more than 40% of the production. So you know how the weather plays out in Maharashtra, how the farmer sentiments are in this region, plays a very critical role in the overall production scenario.
And if you recall, there was an export curve that was put last year on onion. And that prompted farmers to move away from the crop, which led to the 15% sowing decline last Rabi. And because of that, the lower production for the Rabi season, now in September, October, the Rabi stocks have depleted.
And that is what is causing a sharp increase in onion prices. If we talk about tomato, what we see is that, unlike onion, the crop is more dispersed across the country. With Madhya Pradesh, AP, Karnataka, Tamil Nadu and Odisha accounting for half the country's production.
The crop is also grown across multiple seasons. So while onion is heavy in the Rabi season, tomato is spread across Rabi, the summer season as well as the Kharif season. Now, what differentiates onion and potato from tomato, rather I should say, what differentiates tomato from onion and potato is that it is highly perishable and hence more prone to weather-related losses.
So compared to last year, we're seeing that tomato inflation is not transient this time. Typically, it happens around June, July and then starts to wane off. But over the last four to five months, tomato inflation has persisted.
And that's largely attributable to weather-related concerns, either higher temperature during March to May period, excessive rainfall in July to September period. So that is what has caused the inflation on the tomato side to be more persistent this year. And lastly, coming to potato, what we see that among the TOP category, this tends to remain the least volatile since it gets supplied consistently from coal storages throughout the year.
And what we understand is that the stocks have dwindled in the coal storage because of low production coming in from West Bengal and Punjab, which account for lion's share of potato production. And that is what has caused a spike in potato. Now moving to the non-vegetarian side, what we see here is that the broiler prices had been coming down.
And till November, we see that the base, the high base, is going to help broilers still print low prices. But from December onwards, we may see broiler inflation in the mid to high single digits because of the low base that will start playing out from there.
Govindraj Ethiraj: And if you were to look at the three together, Bhushan, that's tomatoes, onions, and potatoes, and look at it over last year, what would be, let's say, the weighted average difference, roughly, give or take, between what a consumer was paying last year versus what she's paying this year?
Pushan Sharma: So if you look at the three commodities, onion, potato, and tomato, what we see is that if you take the average price for this year, Jan to October, and compare that with the average for the calendar year last year, onion is about 25% higher on year, potato about 34% higher on year. Tomato is, in fact, almost flat. And the reason for that is we had really a sharp spike in July and August last year, where the crop had breached 100 rupees mark.
So that's the reason why, because of that spike, it's printing a flat number. But if we exclude that, then this too will be in the double digits.
Govindraj Ethiraj: So overall, you would say that year on year, accounting for all these ups and downs, prices of food, of course, are high, but potato and onion are particularly high. My other question, which follows from this, is that what is the likelihood that this will continue like this? Is there anything that's changing?
For example, you said potato is clearly benefiting from coal storage, but the other two are not. Onions, you also said, was linked to the fact that there was a curb on exports, and therefore that disincentivized farmers from planting it, which is an interesting thing. What can change or not change in, let's say, the next year?
And therefore, how could we look at prices?
Pushan Sharma: If we talk about, say, onion, what we see is that the outlook, we can see some moderation in prices for onion going ahead. And the reason why I say that is, if you look at the prices for last November, the prices were around 59 rupees, which is 10% higher than the current levels. So we are going to have a slightly high base, which will help us see some moderation in YUI growth.
But in case of tomato, the current prices are much higher than what we saw last year. So that is actually not going to be beneficial in case of tomato. And that is also the case with potato.
Last year, the prices for potato were 25 in November, and this year they're above 30. So onion can see some downside, but tomato and potato will see some persistence till about December. And then a lot will depend on how the Rabi planting is.
For both onion and potato, these are heavy on the Rabi side. So how the winter planting takes place for these crops is going to decide a lot. But looking at the early trends, when we are speaking to farmers, what we see is that the planting could be good because the prices are favourable right now.
And the reservoir levels are also good because we've had normal rate fall.
Govindraj Ethiraj: As you look ahead, so there is nothing, as I gather, that's structurally changing which can influence or keep down prices of these three key vegetables going ahead. I mean, if we have good rains and good weather, then things will work out. If we don't, then things will not work out.
My question is, is there anything in our control or not? No, there is a lot that actually can be done.
Pushan Sharma: So for example, sometimes we see there are export curbs that are put in place. And I gave you the example of onion. Well, that export curb can have a short-term benefit, but it just delays the problem.
So we saw the problem actually come in and play out this year. So there needs to be structural measures that need to be taken. Another important and interesting aspect is that if you look at food inflation pre-COVID and post-COVID, right?
If you look at the period 2016 to 20, we saw that the food inflation was quite subdued around 3.6%. Between 2020 and 24, it's averaging about 6.5%. So 300 basis points higher. Overall inflation, on the other hand, is only 150 basis points higher. So the instances of more weather-related concerns are increasing, and that is something that is causing this impact.
Now, what can be done to address this? We would need structural measures more than here and now measures. We firstly need to address the concern of post-harvest losses for fruits and vegetables.
Now, in an economy like India, which is growing, our consumption for fruits and vegetables is going to keep outpacing that for staples, like rice and wheat. And hence, that consumption or demand needs to keep pace with the supply. One easy plug there is to reduce the post-harvest losses.
Government's own data suggests that the post-harvest losses for fruits and vegetables is between 6% to 16%. So plugging that itself can bring in one month of supply into the system. So that's one aspect.
The other is we need to increase the yield. So to catch up with the increasing demand, we need to invest in better quality seeds and inputs that increases our yield. Given that there are more climate-related incidences, we need to invest in climate-resilient seeds.
And that's definitely the need of the hour. And finally, on storage and processing. If we're able to conserve what we have better, process it when we have supply block situations, and that can be brought into the market when the demand really picks up, especially during the festive season.
So these are some of the things that we need to really focus on.
Govindraj Ethiraj: All right, Pushan. Thank you so much for joining me.
Pushan Sharma: Thanks, Govind.
Energy Consumption Trends
India's power consumption rose marginally by about one per cent to 140.47 billion units (BU) in October compared to a year ago, mainly due to heavier base effect, the Business Standard reported.
In the year-ago period, the power consumption grew by over 22 per cent to 139.44 BU from 113.94 BU in October 2022.
The highest supply in a day (peak power demand met) dipped to 219.22 GW in October 2024 from 221.53 GW in the year-ago month.
On the other hand, the peak power demand touched an all-time high of about 250 GW in May this year.
The previous all-time high peak power demand of 243.27 GW was recorded in September 2023.
The larger question in some ways is what are the power consumption trends telling us, about both the nature of production which is a combination of renewable energy sources and conventional energy like thermal power and of course demand.
And how does that compare with last year and what does that tell us about the shifts in economic activity ?
I spoke with Victor Vanya of EMA Solutions, a power market analytics company and began by asking him to describe what he was seeing.
INTERVIEW TRANSCRIPT
Victor Vanya: If you look at the last six months, especially if we talk about election period starting from March, April to June, we saw a surge of around 15 to 10 to 15 percent increase in energy consumption has been observed. And that's again, if you also see that this peak demand, the record peak demand also coincides with that period. And that's again, after that we see that the load started to come down and now the demand which we see right now is more or less close to what we have observed in the last year.
If you remove the election activity, additional election activity where there's a lot of excess supply which is given or excess load which comes in during that period in every five years cycle, that's a common trend we observe. Apart from that, we don't see any major change or major drop in load. It's more or less going closer to last year's demand.
Again, slight differences we see month on month is because of the weather change in weather patterns because sometimes it may be heavily raining in last year October or this October, it's a little different from what's last year. But apart from weather changes, we don't see much of an impact of other economic activities on the demand side.
Govindraj Ethiraj: And what is that telling us if you're saying that the numbers are roughly similar to what were last year?
Victor Vanya: If you remove the weather impacts, there is no much of a difference in terms of economic activity when we compare it with last year's. The major difference we see right now is only the deltas which we observed with respect to weather changes, but there are no major economic indications of growth just if we compare this post-election season in an isolated manner.
Govindraj Ethiraj: Right. And if you were to look at, let's say, the components of energy production, is there anything that's influencing the way demand is, either demand or supply, which is, when I say components, I mean the increasing proportion of renewable energy, including solar and maybe reduction in coal-based.
Victor Vanya: Of course, because the coal stock has been, we took the coal stock to around 30 days this year during election season and hence we see substantial production and supply in terms of coal is concerned, coal-based generation, thermal generation. But after that, right now what we see is this season we have substantial increase in hydro energy compared to last year, maybe around 30% of excess hydro energy production we had this year. Solar, because we are adding more and more solar energy from year on year, the highest increment in terms of net energy is concerned, that we see in solar energy production and it's around 20 to 25 to 30 percentage growth in terms of solar energy.
That's the change we observed this year and that's again when you see the exchange prices during solar hours, we see that the prices have dropped considerably compared to last year and again this is the impact we see due to increased production in solar energy.
Govindraj Ethiraj: But while all of this is happening within the energy production system, this has not really impacted the total output or the demand in between last year and this year? Not much. And finally, how is all of this playing on prices, Victor, in terms of what the user pays or potentially what the user could pay?
Victor Vanya: Since we have a liquid spot market, that's again the benchmark we see in terms of the actual price of market-based prices in the market. So here if you look at the market prices, this year we see that there is substantial drop from August-September onwards, we see that the prices have dropped considerably. Last year we saw that the prices touched around 7 rupees on an average, but right now we see the prices in the range of 4 rupees and below 4 rupees on the spot markets.
That's again, this we see immediately after the election, there's a drop in the prices and that's still going on and we expect that the prices to continue on the lower side this year till next summer comes.
Govindraj Ethiraj: And you would say the main reason for prices staying low is?
Victor Vanya: Again, weather changes and then we have increased production in terms of hydro energy as well as there's some capacity addition from solar energy. These two combine and then there is also a drop. Again, we didn't see much of an economic growth in terms of there is no fundamental increase in demand and the weather has also impacted now.
This compared to last year, we have the weather impact is more on demand wherein we saw that from August onwards, we saw that the demand hasn't increased much because of various factors like humidity and all which plays a major role from August-September onwards, but that impact is very less compared to last year. And since weather has subdued the demand and there is no net increase in economic activity in terms of elixir demand, fundamental change in elixir demand is concerned. Now, we see that the prices have dropped.
Govindraj Ethiraj: Right. Victor, thank you so much for joining me.
Victor Vanya: Thanks, Govind.
