Markets Hold On For Yet Another Day
IT stocks are still looking strong, given the overall encouraging outlook for IT thanks to likely increased spend in America
On Episode 489 of The Core Report, financial journalist Govindraj Ethiraj talks to Revati Kasture, CEO at CareEdge Global IFSC Limited.
(00:00) The Take
(04:50) Markets hold on for yet another day, IT saves the day.
(07:56) Gold prices retreat, oil prices steady.
(09:37) India has a global ratings agency, how does it work?
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Good morning, it's Friday, the 24th of January and this is Govindraj Ethiraj, headquartered and broadcasting and streaming like always from Mumbai, India’s financial capital.
The Take
The top risk among the top 5 risks in the 20th edition of the Global Risks Report 2025 released by the World Economic Forum is that of armed conflict.
State-based armed conflict, now ranked as the #1 current risk by 23% of respondents (Figure B), was interestingly and not surprisingly overlooked as a leading two-year risk two years ago.
Armed conflict is followed by extreme weather events, geoeconomic confrontation, misinformation and disinformation, societal polarisation and economic downturn.
However, there is an umbrella emotion for lack of any other term that overrides all of this - which is that of declining optimism.
There is limited optimism, argues the report because the danger of miscalculation or misjudgment by political and military actors is high.
And of course we seem to be living in one of the most divided times since the Cold War, which reveals a bleak outlook across all three time horizons – current, short-term and long-term.
A majority of respondents (52%) anticipate an unsettled global outlook over the short term (next two years), a similar proportion to last year
Adding everything, the three categories of responses show a combined four percentage point increase from last year, indicating a heightened pessimistic outlook for the world to 2027.
It gets worse over a 10-year timeframe.
The time frame being referred to are immediate, that is 2025, short to medium term 2027 and long term 2035.
The WEF says the analysis aims to support decision makers in balancing the current crisis and longer term priorities.
The risks are broadly split into five domains: environmental, societal, economic, geopolitical, and technological.
Now, if you were to rank the risks, as the WEF has done, 5 of 6 risks are actually entirely man-made or potentially man made.
You could argue that extreme weather is also an outcome of mankind’s excesses but that is a different discussion.
Two of the top 6, polarisation and misinformation, particularly the accelerated spread of it are quite closely linked to technology which also tells you something about the role of technology in not solving the world’s problems.
Within technology, adverse outcomes of AI technologies carries mention, a risk that climbs the most in the 10-year risk ranking.
The role of Generative AI (GenAI) in producing false or misleading content at scale and how that relates to societal polarisation is something the report references directly.
Biological terrorism, malicious misuse of gene editing technologies and brain-computer interfaces are among the other risks. See any linkages between the role of technology in spreading misinformation and brain-computer interfaces, or the people behind them ?
With California reeling under unprecedented forest fires right now which have claimed life and caused untold damage to property and livelihoods, the prospect of extreme weather and its impact, including via forest fires should not be hard to comprehend.
There are a few larger questions that come up.
First, if so many problems are man made, indeed could the solutions also lie within ourselves, as countries or nations or those who lead them ?
Second, if there is only one problem that we can somehow agree that it is a problem, which is climate change, then could we devote more resources to solving it.
You could rightly argue that Elon Musk as a representative of capitalism and innovation is on the right side of the problem with electric cars. But his social platform experiment clearly caters to both misinformation and polarisation.
Elsewhere, there is scepticism and fatigue on forced climate responses, including the environment, social and governance or ESG mandates. And Trump is killing green subsidies, so the signalling is not encouraging.
Davos this year appears to be on the defensive, waiting to see what else Trump would unleash on the world at large and businesses in specific. Most business leaders and heads of states seemed to be in retreat, trying to figure out how to plan for a barrage of threats.
You can’t blame them.
A key item on the Global Risk Report agenda should have instead been, how to derisk from Trump and focus on the opportunities beyond.
That is a conversation the world, including countries like India desperately need to have.
Maybe next year.
And that brings us to the top stories and themes for the day:
Markets hold on for yet another day, IT saves the day.
Gold prices retreat, oil prices steady.
India has a global ratings agency, how does it work?
Markets
The term that I have not seen used for a while for whatever is a relief rally.
Thursday looked like one, maybe Wednesday was one too.
The BSE Sensex closed up 115.39 points at 76,520.38 while the NSE Nifty was up 50.00 points or 0.22 percent at 23,205.35.
IT stocks are still looking strong, given the overall encouraging outlook for IT thanks to likely increased spend in America, a key market for Indian IT services companies.
The IT index has gained 4% in two sessions on the back of U.S. President Donald Trump announcing big spending plans for AI infrastructure on Tuesday, Reuters reported.
Several IT stocks including Persistent Systems and Wipro benefited from the wave.
The broad market has gained some strength and veered away a little from the benchmarks again.
In the broader market, the Nifty Midcap 100 surged nearly 2 percent while the Nifty Smallcap 100 ended with 1.1 percent gains.
Shares of Hindustan Unilever fell as much as 3.5% on Thursday to their lowest level since May after the Indian consumer goods maker forecast near-term margin pressure.
HUL, maker of Lux soaps, on Wednesday forecast near-term margins at the lower end of its previous forecast range of 23%-24% as costs of key commodities such as palm oil and tea continue to rise and urban demand hit a two-year low in November, Reuters reported.
The larger backdrop is this.
Most of the gains made following the entry of a new Government in India in June last year have now been erased.
The benchmark Sensex and Nifty indices have retreated to levels last seen before the Government’s swearing-in on June 9, after rising as much as 12 per cent, a report in Business Standard says.
The report adds that from its all-time closing high of 26,216 on September 26, the Nifty 50 has dropped 11.7 per cent to 23,155 — a level last seen on June 7 — while the 30-share Sensex is down 11 per cent from 85,836 to 76,405.
Several sectoral indices, such as realty, energy, and media, have plunged over 23 per cent each from their record highs. Currently, only the information technology (IT) and pharmaceutical sectors have performed well during Modi 3.0. The Nifty IT index is up 21 per cent, and the Nifty Pharma index has gained nearly 13 per cent, driven by optimism around the US economy — a key market for both tech and health-care companies.
Eyes continue to be on the Union Budget to be presented on February 1.
And with seemingly less optimism about any significant budget giveaways, unless of course there are some tax announcements, which in turn seem tough given the overall fiscal situation, including the fact that collections are beginning to slow.
The markets will instead look ahead at what the Budget will do and possibly look at the direction like extent of fiscal consolidation and the emphasis on physical and social infrastructure or between them.
The S&P 500 traded around flat Thursday as Wall Street wondered if record highs were once again in the cards.
The broad market index shed 0.1%, while the Dow Jones industrial Average
advanced 0.2%. The Nasdaq Composite lagged, falling 0.5% as Nvidia
and Amazon pulled back.
This action comes a day after the S&P 500 set an intraday record and finished Wednesday’s session just below its record closing high. The Dow was also within striking distance of new highs on Thursday.
Oil Prices Steady
India's state-run refiner Bharat Petroleum Corp sees its Russian oil processing down to 20% in March from 31% this month as it awaits offers from traders, its head of finance Vetsa Ramakrishna Gupta told an analyst call on Thursday.
The company and other state refiners such as Indian Oil Corp (IOC.NS)
Hindustan Petroleum , and Mangalore Refinery and Petrochemicals buy Russian oil in the spot market and the lack of clarity regarding its availability is forcing them to look for alternatives.
BPCL's Russian oil processing declined to 31% in the December quarter from about 35-40% in the previous month. The company, along with other Indian state refiners, received a lower supply of Russian oil in January and February.
Washington has imposed sweeping sanctions targeting Russian producers and tankers, disrupting supply from the world's No. 2 producer and tightening ship availability.
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Meanwhile, gold prices dipped on Thursday after hitting a near three-month high in the previous session, while market participants awaited further clarity on policies from the U.S. President Donald Trump's administration.
Spot gold was down 0.4% at $2,744.49 per ounce by 1246 GMT, having hit its highest since Oct. 31 on Wednesday. U.S. gold futures shed 0.7% to $2,751.20.
India Goes Global With Ratings
We usually think of sovereign ratings as done by Moody’s, S&P and Fitch, there is now an Indian global sovereign rating agency as well.
CareEdge Global IFSC Limited (CareEdge Global) is a full-service Credit Rating Agency (CRA) registered and authorized by the International Financial Services Centres Authority (India).
CareEdge Global, earlier called Care Ratings which was set up in 1993 and is the country’s second largest rating agency.
I caught up with Revati Kasture, the CEO of Care Edge Global and began by asking her to tell us about the origin of the company.
INTERVIEW TRANSCRIPT
Revati Kasture: So it is the second largest rating agency in India and it is the only domestic rating agency which means we have no foreign ownership. So our thought was that how do we kind of expand our operations into the global space and we've been in the ratings business for close to 30 plus years and we have a significant understanding of the domestic rating business. We have subsidiaries outside India, we have subsidiaries in Nepal, we have subsidiaries in Africa, in Mauritius and South Africa.
So we've been doing ratings in those geographies also, all domestic rating businesses. So the idea is that why not explore the international rating space and the timing we thought was also right because India the way it's positioned geopolitically is wanting to be the leader of the global south and once you say that you know it's wanting to be that in very many disciplines so why not credit rating. Plus we are if you look at internationally also placed among the top 10 rating agencies in terms of the number of companies rated or the volume of debt rated so on.
If you look at emerging markets and if I then say the subsidiaries of large rating agencies are counted within those rating agencies then we are the largest rating agency in the emerging market and that's why we thought we should have a foray into the global or international rating space and that's why this company you know carriage global IFC limited.
Govindraj Ethiraj: And your primary business at least at start is sovereign ratings which means you're actually rating countries and their whatever debt capability and so on.
Revati Kasture: So when you say a global rating agency we would be our endeavour is to rate companies which are situated in any markets for their foreign currency borrowings right. To do that we will have to give a benchmark sovereign assessment which is why sovereign rating. Now sovereign rating is essentially as you rightly said a country assessment of the assessment of a country's ability to repay debt on time plain and simple but it kind of have a lot many more layers you know so it's not only ability to pay otherwise you know India has never defaulted in the past right but it's also an economic fiscal monetary institutions of governance external debt quality etc.
The assessment is a little more broad based and that's why you know we have to do this assessment to get a benchmark sovereign rating for our country. Unless and until we do that we are not able to assess companies within a country because a company rating will be in a way between threshold or there will be a kind of upper ceiling to the company rating which is a country ceiling. You can get one or two notches higher but that's typically how it will be.
Govindraj Ethiraj: And we all know of Fitch and Moody's and S&P as the global rating agency so are there other rating agencies which are also global in the way you are trying to be global?
Revati Kasture: Yes there are there are close to 10 rating agencies registered with NRSRO which is the licencing authority in the US. So apart from the name that you gave there is also a Japanese credit rating agency JCR. There is a dominant bond rating agency of Canadian agency DBRS.
There is a Kroll bond rating agency which is the largest in the US. So there are these names which are also there but all of them are not as big as the top two agencies in the country.
Govindraj Ethiraj: And you are also registered in this?
Revati Kasture: So we have right now a licence in IFSCA. IFSCA is international financial services centre authority which is a new concept which the government of India is propagating which is an international financial service centre outside of India. And this authority has powers of the central bank, the capital market regulator, the pension fund and the insurance regulator.
So it is a unified kind of authority. So they have given us a licence to do global scale or sovereign ratings through IFSC ecosystem. So that's the licence right now.
So whichever companies are listed on the capital markets or the exchanges at IFSC, we will be the rating agency which will do rating. So they made rating compulsory from 1st of October 2024 and from 1st of April they've made rating compulsory from an IFSCA registered rating agency which at present is us. So that's where it is.
Govindraj Ethiraj: So would you be rating let's say a company in another country which may not be let's say the United States or somewhere in Europe but would you be rating those as well or are you confined to IFSC listed companies?
Revati Kasture: So IFSC itself is trying to attract the other countries to get their companies listed on the exchange and that's the endeavour really. It's like anybody and everybody earlier used to just go and rate a list in Singapore. And obviously all Indian companies used to list Singapore then started the London exchange and then we started to do a listing on Singapore and But if you look at last two years because of whatever other tax benefits and all the other incidental costs, 100% of the debt listings from India are happening in IFSC.
They are also trying to get into other geographies let's say Malaysia, Indonesia or any of the Middle East countries to try and tell those companies to come and list on IFSC for the benefits that IFSC offers. A proximity being one of them, second cost being the other. We expect that there will be listings from countries outside of India into the IFSC exchange.
But yes at present we are registered to rate companies which want to have a listing on the IFSC exchange.
Govindraj Ethiraj: But you could rate companies which are outside of this universe.
Revati Kasture: Absolutely.
Govindraj Ethiraj: And you might. Do you therefore rate companies that are not in this universe in India or this is Care Ratings which is your carriage which is your parent company?
Revati Kasture: So two aspects any company which needs a foreign currency bond issuance cannot use Care Ratings India rating because that's a domestic scale rating because the investors are all investors outside of India and they need an international scale rating or a global scale rating which will be issued by Carriage Global IFSC. So as we speak we launched our services in October 2024. We've done ratings of 39 countries of which 24 are emerging countries and 15 are developed countries.
We have also done five corporate ratings, five corporate bond ratings, four of which are already listed on the IFSC exchange.
Govindraj Ethiraj: So as India thinks global, wants to be more global, including in let's say trying to have a reserve currency or something close to a reserve currency, you feel that the whole effort of having homegrown but global sovereign rating agency sort of goes together and is a reflection of that?
Revati Kasture: Yeah so having a rating agency within your fold is like a soft power.
Govindraj Ethiraj: And not too many countries have it apart from the big ones.
Revati Kasture: Yes yes not too many countries have it, none of the emerging economies have it. I mean Japan and Asia is a developed economy so to say. China did try to do something in the space but was not successful because they kind of gave a very differentiated rating to their own country and that's where you know the effectiveness of the methodology really was questioned.
So we really don't want to do that. We don't want to be you know seen as an extension of government. We want to be independent.
So Carriage itself has resources to fund this particular venture. We want to be seen as an agency which offers a differentiated view because it is a need of the hour and is independent. That's the positioning that we want to take.
Yes definitely you know because we are from India and we have worked in markets like Africa also, we understand the developing and underdeveloped market space and that is something which will definitely be a kind of differentiator for the world to see.
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