Markets Hit Record Highs Again
The big stocks that moved on Wednesday were companies like Reliance Industries, Bharti Airtel, Ultratech Cement and the big private banks, including ICICI Bank
On Episode 326 of The Core Report, financial journalist Govindraj Ethiraj takes you through business news headlines of today.
Our Top Reports For Today
SHOW NOTES
(00:00) The Take
(02:12) Stories Of The Day
(04:41) Markets hit record highs again as mainline stocks now take charge.
(07:12) NVidia’s illustration on volatility
(08:16) Oil prices are worryingly high
(10:49) How remittances from overseas Indians are double of FDI and FPI
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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Good morning, it's Thursday, the 27th of June and this is Govindraj Ethiraj broadcasting and streaming from and headquartered in Mumbai, India’s financial capital.
Today is a short edition as I am in transit so here goes:
The Take: Public policy and business don’t talk till they do
What will happen if something you need for your kitchen or a bar of soap or, amazingly, even a Playstation does not come to you in 10 minutes. Will it mean a matter of life and death ?
Clearly not, since we are talking about stuff that you need for daily existence and not life saving medicines.
Before I tell you where I am going with this, here is the news.
Reports in the Economic Times say Reliance Retail has started a pilot for immediate delivery of groceries and some consumer products in Navi Mumbai and Mumbai so as to fulfil orders within an hour.
Why an hour ? Presumably, anything beyond that and customers might start hyperventilating.
Apparently, Reliance will try and reduce the delivery time to 30-45 minutes which of course could once again make the difference between survival and not for many customers.
Of course Reliance is only responding to what it thinks is market demand.
Which of course is foolish, Given that Reliance has real shareholders to respond to and is not trying to sell its business tomorrow to a private equity investor, it's surprising that the company would want to enter this game.
Of course, Reliance might have well calibrated, as any thinking business leader would that they would jump in now but pull back as soon as the competitors, usually because they ran out of funding, or customers stopped paying a premium for something that they should have sought counselling for. This is my view of course.
But here is the real problem.
Indian Express spoke to some 60 such gig workers who do these lighting workers at the peak of Delhi summer, which is of course a few weeks ago.
A third of them said they had to call in sick because they couldn’t survive the 45 C which people in air conditioned rooms complain about. Others said they suffered but could not afford to call in sick.
“In the past two months, not a day has gone by when I have not had a debilitating headache at work. I think it is because of the sun. But I can’t take a break," Martin, who delivers for Swiggy Instamart, told Express.
The heatwaves may dissipate as the monsoons take over but the gig workers’ troubles will not end as they will encounter the prospect of delivering in heavy rains. And then there will be the bitter cold in the north of India, which will be worse than before.
Here’s the other problem. More people whizzing around on bikes in severely congested urban cities is not a business opportunity, it is business contributing to urban decay for no real reason.
I am not arguing against ecommerce. But I am arguing against too much of it. Because our cities cannot take this load.
And our young workforce cannot be played with just because we are unable to create other jobs.
There are of course many manual jobs which pay well too, including in construction. But construction which employs over 75 million people also has some safeguards though only relatively and there is some protection from heat thanks to the very nature of the job.
The larger issue is this.
Civic authorities have to regulate gig workers in the delivery economy or the delivery companies to ensure their working conditions are reasonable.
Second and equally important, civic authorities have to ensure there is balance in terms of load on infrastructure. It's tough to do, but the opposite cannot be the case, which is that 50 companies want to start delivering in 10 minutes and exposing their workers to hazardous conditions, including high density traffic and pollution.
Some delivery companies have said they are conscious of climate and will use battery-based vehicles.
That is a problem no one asked them to solve, quite literally and frankly.
Hopefully, we will see some resolution and solution to this problem, or of course we can hope the venture capitalists run out of funds, which is optimum too and only that it happens sooner than later.
There is nothing worse than a poor business model being flogged endlessly and causing harm to man and environment.
Onto our top Stories & Themes
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Mainline Stocks Are In Charge
So the bull run this time is clearly with mainline stocks which were somewhat shunned earlier back in charge.
This also is a reflection of more institutional investors, including overseas, returning to the markets, as we discussed yesterday.
Institutional investors also prefer the big and perhaps old favourites for their strong balance sheets, trustworthy managements and of course track record even if the share prices have been subdued in the last year for reasons of slower growth, mostly.
That’s something to keep in mind as an investor when you do the next round of stock picking, distribute between old favourites and some new bets.
The big stocks that moved on Wednesday were companies like Reliance Industries, Bharti Airtel, Ultratech Cement and the big private banks, including ICICI Bank which has been hitting record highs.
Speaking of records, the BSE Sensex touched a record high of 78,759, and closed at 78,674, up 621 points. The NSE Nifty ended at 23,869, up 148 points or 0.62 per cent.
In the broader markets, the BSE MidCap slipped 0.29 per cent, while the BSE SmallCap rose 0.15 per cent.
The Nifty has hit record highs in eight out of 11 sessions, Reuters pointed out adding the Nifty has gained about 6% in June so far, on course for its best month this year.
Oil to telecom major Reliance, who we just spoke of and who also has the second-highest weightage on the Nifty, rose 4.1% to hit an all-time high. It has risen about 2% since April 1, though less than the Nifty's 7% increase, Reuters said.
ICICI Bank rallied for the seventh session in a row.
Global funds have been net buyers of Indian equities for 10 straight days, the longest run in nearly a year, Moneycontrol reported, quoting Bloomberg data to say they bought $3.4 billion worth of shares in the period through June 21.
Gold Prices Fall
A quick update on gold, global prices - which also drive Indian - have fallen to their lowest in nearly two weeks on Wednesday as the dollar get stronger and investors waited for fresh cues from the Federal Reserve on where interest rates in the US could go.
Reuters reported that spot gold has fallen to $2,308.00 per ounce, hitting its lowest since June 14. U.S. gold futures also fell 0.5% to $2,319.50.
What’s Up On Wall Street
We spoke yesterday of how Nvidia was hammered on Wall Street, losing some $430 billion in market value
We also spoke of how it had begun recovering and it did, almost 7%.
The lesson of course as we pointed out yesterday is that stocks at their lifetime peaks can get volatile even if the fundamentals are in their favour as they are in the case of Nvidia.
The WSJ has been asking and wondering if Nvidia’s stock price rise was bringing back memories which are obviously not pleasant of the 2000 dot com boom.
So even if Nvidia has recovered, it could get stronger or suddenly reverse. We don’t know.
Meanwhile, the interesting story on Wall Street is this.
FedEx Corp. considered a barometer of economic growth — jumped about 15% on a bullish forecast, Bloomberg report.
Fedex is a logistics company of course.
Oil Prices Up
Oil prices are worryingly high.
They were up on Wednesday nearing their highest level in almost two months.
Forecasts are now talking of a combination of factors, including peak summer demand season and geopolitical risks from the Middle East conflict, Bloomberg reported.
The American Petroleum Institute (API) on Tuesday reported U.S. crude oil stocks rose by 914,000 barrels, market sources said.
Brent crude oil futures were up 45 cents to $85.46 a barrel on Wednesday.
A strong dollar is capping gains, as the market remained optimistic of a rate cut before the end of the year, Bloomberg said because a stronger currency makes dollar-priced oil more expensive for buyers in other currencies.
India is a good example. If the rupee depreciates further, which it's not likely to but if it did, then each barrel of oil would cost more to buy as we have to pay more rupees per dollar.
India has a specific problem as well which is that Russian oil which we were getting at massive discounts starting two years ago after it attacked Ukraine and the west imposed sanctions are no longer coming at those discounts which had hit 16% or so at peak.
So our oil bill will rise.
Could Weak Monsoon Affect Inflation
Cumulative rainfall till last week has been below the long term average, while projections earlier were that they would be higher, though the projection was for the whole season.
A report in the Economic Times quotes various economists saying the stalled rainfall across the majority of the country has led to a delay in kharif sowing.
A significant delay in kharif sowing will impact food output and the rabi sowing season, as farmers will have less time to prepare their fields after the kharif harvest.
Moreover, retail food prices had increased due to persistent heatwave conditions.
Remittances Hit Fresh Records, Double Of FDI And FPI
Indians residing overseas sent some $107 billion net last year back home, crossing the $100 billion threshold for the second consecutive year, according to a report by The Economic Times.
Net remittances are double of the $54 billion from foreign direct investments (FDI) and portfolio investments during the same period.
The total figure was actually $119 billion in FY24. After accounting for repatriation of income by foreign residents and other related expenses, the net private transfers amounted to $107 billion, the news report said.
According to a survey by the Reserve Bank of India (RBI) on post-Covid-19 remittances, the United States emerged as the primary contributor, constituting 23 per cent of the total amount. Additionally, remittances from the Gulf region experienced a decline during this period.
The majority of these funds are intended for familial support, with a portion also allocated to investments such as deposits, according to the RBI’s findings on remittances, as shown by the report.
