Markets On Longest Losing Streak Since February 2023
The Nifty now notched its longest losing streak since February 2023, falling for the seventh consecutive session amid a sharp sell-off in IT and energy stocks
On Episode 437 of The Core Report, financial journalist Govindraj Ethiraj talks to Manish Raj Singhania, Managing Partner of Ralas Motors and former FADA President as well as Dhaval Ajmera, Director at Ajmera Realty & Infra.
(00:00) The Take
(04:41) Markets on longest losing streak since February 2023
(06:17) Can an escalation in trade tensions drive up gold prices?
(08:02) Auto sales pick up in the festive period, what is the final analysis?
(15:49) Real estate trends are steady
(27:43) Indians migrating to OECD countries like US and UK up 30%
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].
—
Good morning, it's Tuesday, the 19th of November and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The Take
In May this year, stockbroker CLSA put out a Modi stock portfolio listing 54 stocks it was betting on to ride the Modi wave when he returned to power.
Which he did but clearly not in the way that CLSA or most of the markets had expected so CLSA revised that portfolio to just 2 stocks, being ONGC and Reliance Industries.
In early September, it emerged the so-called Modi stocks had climbed only 2% as the Government completed its first 100 days in office after that third term win in June.
In contrast, consumer and software stocks rallied 20% and 34%, respectively, Bloomberg pointed out.
Over the weekend, CLSA was back trying to grab attention by putting out a report called pouncing tiger, prevaricating dragon, the meaning of which is not so clear to me but must be to the authors.
It said that CLSA was reversing its earlier tactical allocation shift from India to China.
As a quick backgrounder in October 2023 CLSA upgraded India, from 40% underweight to 20% overweight citing a favourable credit environment, lower energy costs due to discounted Russian crude, and strong GDP growth prospects.
A year later or last month, CLSA reduced India's overweight to 10 per cent, while adding to China amid what appeared to be early signs of a market recovery in the dragon nation.
All of this is obviously independent of the Modi stocks proposition put out in May and more to do with the big exodus of foreign capital that happened starting September 27 and has crossed over $13 billion now.
Now CLSA says it has reversed its tactical allocation in early October, returning to a benchmark on China and a 20% overweight on India.
It also points out that both MSCI China and India have corrected by 10% in US dollar terms so they did not lose making the switch.
It further adds the chief risk to Indian equities is a frenzy of issuances or IPOs swamping the market with cumulative 12 month issuances being equal to 1.5% of market capitalisation, a tipping point.
On that I agree.
So what’s changed ?
Obviously Donald Trump has threatened to hit China with 60% import tariffs into the US.
US imports from China were around $165 billion in 2023, lower than previous years, taking out the pandemic year.
India will get hit too, between 10 and 20% as per the promises made or threats issued so far.
Which figure will hold end-January when Trump formally takes over as President, it is tough to say at this point.
Remember, if all countries get hit, then the relative damage is lower and countries like China are better prepared now.
Anyway, a fresh report in Bloomberg yesterday points out that
CLSA and Citi are taking opposite stances on Indian equities.
India is least likely to feel the heat from potentially higher Trump tariffs and India offers a relative oasis of forex stability and the recent stock declines have made valuations attractive, CLSA has said.
Citi on the other hand has downgraded Indian stocks, citing concerns about weaker earnings momentum.
But then, in May, Citigroup downgraded Chinese equities to neutral and upgraded India to overweight saying they liked markets with inflecting earnings and strong EPS momentum.
It would take much concentration to keep pace with these shifts.
On the other hand, almost everything we discussed so far is now out of the window.
Which tells us a few things.
One, no one is able to accurately predict anything beyond a few months, particularly when geopolitics is involved and that is increasingly playing a role in our lives and stock prices.
Most predictions are based around events and not a longer term view.
If there was a longer term view on a sector or company, which there would have been, it would not matter either way because something else would happen and supersede it.
Stock analysts are human and can sometimes rush to make up for lost calls, including with fancy charts which you and I are not good at.
The good news is that Donald Trump is human too and he might change his mind before January 20, 2025.
And that brings us to the top stories
Markets on longest losing streak since February 2023
Auto sales pick up in the festive period, what is the final analysis ?
Can an escalation in trade tensions drive up gold prices ?
Real estate trends are steady
Indians migrating to OECD countries like US and UK up 30%
Losing Streak
The Nifty now notched its longest losing streak since February 2023, falling for the seventh consecutive session amid a sharp sell-off in IT and energy stocks.
The Sensex, swung again as it usually does when sellers and buyers face off, swinging 900 points on the bourses.
The BSE Sensex shed 241.30 points or 0.31 per cent to settle at 77,339.01, trading within a range of 76,965.06-77,886.97.
Similarly, the NSE Nifty50 closed at 23,453, down 78.90 points or 0.34 per cent per cent. The index fluctuated between 23,350.40-23,606.80.
The reasons for the weakness were broadly the same as before, slow earnings, continued selling by FIIs and of course high valuations.
On Wall Street, things have cooled off now with the markets mixed overnight as Wall Street waited for major earnings reports.
Tesla jumped 8% pre market after Bloomberg News reported, citing sources, that President-elect Donald Trump’s team is working on ways to ease regulation on self-driving vehicles.
All indices are now down as of last week.
The only thing that is up is AQI levels in New Delhi
Hundreds of flights were delayed as a thick blanket of toxic smog swamped most parts of northern India on Monday.
AQI readings were the worst in New Delhi this year.
Visibility dropped to 100 m (109 yards) in Delhi and Chandigarh, a city northwest of the capital, but authorities said flights and trains continued to operate with some delays, Reuters reported.
Goldman Says Go For Gold As Trade Tensions Rise
Gold will rally to a record next year on central-bank buying and US interest rate cuts, according to Goldman Sachs Group Inc., which listed the metal among top commodity trades for 2025 and said prices could extend gains during Donald Trump’s presidency, Bloomberg reported.
“Go for gold,” analysts including Daan Struyven said in a note, reiterating a target of $3,000 an ounce by December 2025.
Interestingly, Goldman feels that there could be higher structural demand from central banks, while a cyclical lift would come from flows to exchange-traded funds as the Federal Reserve cuts, they said.
Gold has as we know hit successive records — till of course Donald Trump won and then then a strong dollar took over.
Interestingly, the view is that an escalation of trade tensions could revive speculative positioning in gold, they said.
In addition, rising concerns over US fiscal sustainability may also aid prices, they added, noting that central banks — especially those holding large US Treasury reserves — may opt to buy more of the precious metal.
Spot gold was last at about $2,584 an ounce, after touching over $2,790 last month.
Oil Prices
In other outlooks, Brent crude was seen trading between $70 and $85 a barrel next year, although there’s near-term upside risk if the Trump administration clamps down on flows from Iran, they said. Base metals were favoured over ferrous, and European gas faced upside risks in the short term from the weather, they said.
“The new US administration further raises the risks to Iran supply,” the analysts said, citing scope for potentially tighter enforcement of sanctions in a maximum-pressure campaign. “A potential strengthening in US support to Israel may also increase the probability of disruptions to Iran’s oil assets.”
Auto Sales
The main festival season, around which most major sales of discretionary items and purchases happen, has mostly ended.
Because of some variations in different festive periods within this three month band, there was some confusion about whether the overall sales numbers were holding up or not.
For instance, total vehicle retail sales in India witnessed a 32 per cent on-year rise in October to 28,32,944 units with all segments including two-wheelers and passenger vehicles registering strong growth, Federation of Automobile Dealers' Association (FADA) said last week.
The strong growth in October this year was largely driven by the rural market, especially boosting two-wheeler and passenger vehicles sales, supported by increased Minimum Support Price (MSP) for Rabi crops, FADA said
Passenger vehicle or car sales on the other hand increased 32.38 per cent to 4,83,159 units, from 3,64,991 units retailed in October 2023, it stated.
Two-wheeler sales for the previous month were recorded at 20,65,095 units, as compared to 15,14,634 units in October 2023, registering a growth of 36.35 per cent, while three-wheeler sales were up 11.45 per cent year-on-year to 1,22,846 in in October 2024, it said.
But what is all this adding upto
However, despite the strong sales performance, FADA raised concerns about high inventory levels in the PV segment. Dealer inventory remains elevated at 75-80 days of stock, despite a slight reduction of five days. This oversupply situation might lead to continued substantial discounts through the end of the calendar year.
To understand where things were right now, I reached out to Chairman of FADA Academy and Research President Manish Raj Singhania and began by asking him how things have been.
INTERVIEW TRANSCRIPT
Manish Raj Singhania: The total market has evolved. Definitely the initial expectation that post-COVID and post BS4 to BS6 price transition, things in rural market were taking time to settle down. And the recovery of rural market was due.
We were expecting in, you know, three, four years post-COVID, we will see the revival of rural market. But now what exactly has happened, the market, rural market has now started delivering numbers. Rather than the rural market banking on the entry-level passenger car, their aspiration to buy a better vehicle, more safer vehicle, more feature-orientated vehicle, a larger vehicle.
That's the space that the rural market has now entered into. And that's why we can see even though retails are happening in rural market, but the same is not being heavily reflected on the entry-level passenger car numbers. The choice of the customer has changed, has evolved.
I think this is one of the most primary factor. If you look at the two-wheeler segment, it is really rocking. All two-wheeler numbers are delivering well.
The growth is almost every time in double digit now. So there is no question of rural market not evolving. Also the ever-increasing MSP, minimum support price by the central government to the crops, that has also increased in the heavy cash flow in the rural India.
This year itself kind of increased MSP will result in an additional cash flow of almost 25,000 crore for the crop industry itself. So I think the customer preference, customer demand or requirement has changed and it is now more towards the SUV, space, feature-orientated, safe vehicles. So that's why probably all the sedan segment companies are not seeing the numbers really happening there.
Govindraj Ethiraj: Just to recap, you're saying that the rural consumer, particularly for cars, is now more aspirational than the urban consumer on a relative basis?
Manish Raj Singhania: Yeah, definitely. If you look at both the two-wheeler as well as the passenger car segment, the same story is happening. The more premium product, the better is the, you can see in the terms of booking, you can see in terms of retail.
If you look at the price bracket of passenger car of 10 lakh plus, that segment itself is rocking. Every year, every month we are seeing a steady growth. We were expecting there has to be some kind of a stop there.
It continues to grow, the penetration of SUV continues to grow every month.
Govindraj Ethiraj: Right, so if you were to take let's say 100 cars sold by a dealership like you, so what would it have been in the lower end before, let's say a year ago and what is it today?
Manish Raj Singhania: The real story is that 60% is being now occupied by SUVs, that is very clear. And rest is divided among the entry-level and sedans and likes. Majorly, we should not forget that the taxi aggregator, these are also a major buyer.
And CNG is playing a major role for the numbers to keep rolling in these segments. So that's a segment that has been kind of moving and growing. But overall, if you look at the passenger car personal segment for individual users, so that segment is not moving much.
Govindraj Ethiraj: Right, so now to come to the festival season, now I think festival season is over because we had some let's say confusion about the calculation because the exact dates were different from the previous year and so on. So if you were to now look at the entire festival season, how has that fared compared to last year?
Manish Raj Singhania: See, we should not forget that last festival season we had already created a huge mountain of records. This festival season, we were able to surpass it. That's a phenomenal number.
And at FADA, we do not calculate, you know, we definitely give the data on a month-to-month basis. But if you want, we also calculate the 42-day festive period, that is start of Navratra to 10 days after Diwali, because Vahan numbers need to settle down. The states work in various ways.
So Vahan numbers need to settle now. And that's how we come up from exact festival to festival. If you compare festival to festival numbers, the passenger car segment has grown.
It is still clocking good numbers. Almost 67% growth was there. I'll share you the press release that we had given out for the festival period.
So I think the segment continues to grow. And there are two segments which are now clearly available at the dealership level. There are models which were not commanding any waiting and all that.
Excells, off-the-shelf, and, you know, good schemes for the consumer schemes for the consumers. But there were few models with every UEM which continued to command waiting period and they were not available out of the shelf. So that clearly shows there's a still a kind of certain percentage of growth that can still happen in the passenger car segment since the booking continues to, especially for the SUV segment, the booking continues.
Govindraj Ethiraj: Yeah. And we've seen that in some models where there are still very long waiting periods. And finally, the overall inventory levels have still not really gone down.
As I, from what I could see from the official release, FADA is still talking about 75 to 80 days. So how is that looking? See, inventory level will not go down in one month.
Manish Raj Singhania: OEM should understand the true situation. In spite of such a rocking festival, dealers continue to be saddled with heavy inventory. They need to take it again into, they are the people who need to act for continuous three or two, four months.
The dispatches has to be lower than the retail. Then only the inventory level would be at a comfortable level. Similar situation was there last year and we took into account of the high inventory level and they reduced it.
But February, March, we had come down to inventory level of almost 45, 50 days. But again, the inventory level was pushed up. So it is right time.
We are approaching year-end and year-end offers are always there now since these stocks are available at the dealership. So I think it is the right time for OEMs to correct the inventory and bring dealership stock at a comfortable level.
Govindraj Ethiraj: Manish, thank you so much for joining me.
Real Estate Trends
Mumbai is the key driver for India’s overall real estate market with the highest value deals and total value as well.
Property consultant Anarock’s latest compilation of data shows a decline of 13% Quarter-over-Quarter (QoQ) and 6% YoY during July-September.
For the country as a whole, sales fell 11 per cent during July-September to 1.07 lakh units in seven major cities on lower launches and an annual 23 per cent growth in average prices, according to Anarock.
The top 7 cities also witnessed a drop of 19 per cent in new housing supply,
"Nevertheless, the fact that sales remained higher than launches indicates that the demand-supply equation remains robust," Anarock said.
Stockmarkets and real estate markets don’t move in sync but there is usually a lag connection.
Is there any impact from the recent corrections we have seen in the stockmarkets, even in sentiment.
I reached out to Dhaval Ajmera of Ajmera Realty and Infra, a listed stock in the realty space.
The more than 50-year-old Ajmera operates predominantly in Mumbai in the mid market space mostly in housing and now in the premium space as well.
I began by asking Dhaval how he was seeing the market right now.
INTERVIEW TRANSCRIPT
Dhaval Ajmera: So basically, just to give you a word sense, I think the real estate market is honestly post-Covid really well. There had been a great jump, I would say, immediately post-Covid because people really realised the importance of home.
If I look at real estate is, you know, moving in a very positive sign. There has not been very great jumps, like, you know, today the stock market moved maybe 10 percent or next month it was double.
Real estate has not moved like that. It's moving steadily up and that is where we are seeing a great movement happening. There has been a great sales all across.
And my feeling is this will continue because Indian economy is also looking at a steady rise over the next few years.
Govindraj Ethiraj: Tell us about your book right now in terms of the projects that you have on hand and where are they located or which parts of the country and Mumbai city, which is where you are prominently, and what's the kind of demand that you've been seeing again in recent months?
Dhaval Ajmera: So, we've been in this business since about 55 years. We've delivered about 45,000 apartments and now moving forward, we have currently, we have about a million square feet of projects which are currently going on primarily more in Bombay. We have another 4,500 crores of project coming up in the next six to eight months time, which will be also launched by about six or seven different projects.
Majority of them are in Mumbai, but there is one or two in Bangalore as well. And we are also having another land bank with us, which is about 12 million square feet, which is available with us. So, it's about 1.2 crore square feet of carpet available majorly in Bombay. So, that's how our order books are going to end. Those 1.2 crore square feet will slowly and steadily start coming into the books as and how, you know, things clear out in terms of approvals, etc.
Govindraj Ethiraj: And how are you seeing demand and at what segments are you seeing more demand right now?
Dhaval Ajmera: So, overall, if we look at our projects and when we specifically look, you know, when what we've experienced, where we are bought in Bombay and Bangalore, our sense is mid-luxury. And in Mumbai, primarily luxury and mid-luxury doing really, really well. And if I have to look at Bangalore per se, it's also mid-luxury in the Bangalore market perspective, I would say.
So, those are the kind of places where we are seeing good demand. So, when I say that, we are looking at a pocket ticket size of about two crores to four crores in Mumbai. And Bangalore would be about a crore.
Govindraj Ethiraj: Right. And if I can ask you a cost question, how have costs been moving in the last couple of years? And I mean, all raw materials, including land, which is obviously the dominant part of it.
Dhaval Ajmera: So, cost has been rising. And there is no doubt about it that it's not been verified. It was recently, in fact, there was an article that overall about 11% cost has risen in the last one or two years time.
And it's primarily because there has been sometimes labour issues, sometimes raw material issues and, you know, stuff like that. Thankfully, a lot of these materials are now being produced in India, have been manufactured in India. So, we are not having so much trouble or dependency on China.
Maybe some finishing items here and there would be available from China. But majority, I would say 80-90% is coming within India. So, that is a good part.
But yes, there has been a cost rise and that, you know, it's basis to the inflation and demand supply. So, the cost is slowly rising. But overall, I think with that, there has also been a steady price rise and not a very great jump, you know, significantly coming up.
So, that way it is being absorbed in the market.
Govindraj Ethiraj: What's the kind of profile of people who are buying and booking your projects? So, for example, we've seen, you know, NRIs participate quite heavily in some projects in Delhi or other parts of the country as well. And does that matter at all?
I mean, rather who is investing and in what intensity?
Dhaval Ajmera: Every project has a very different thing. So, if I have to look at our own projects, I'm just giving you some examples. Like, let's say, one of our Juhu project, which is a very high-end and a very luxury project.
They all will be business segment guys where they have their own businesses and they've been very successful in their lives. If I look at Vadala project of ours, which is mid-luxury project, over there, we'll have a mixture of business and professionals who are at the senior level. When we look at a project which is in Bandhuk, those are all service class people.
So, basically, they'll be booking and doing like that. And Bangalore also is primarily lot into working. So, the price bracket and the area depends a lot.
But majorly, I see demand in all three segments. Affordable, mid-luxury, super luxury, and I would not say affordable, but which is tangible with public, which is like a senior level guy. I think that's the market which is doing really well.
Govindraj Ethiraj: We've, of course, been seeing data that affordable housing has been slowing down, including because of the challenge in accessing loans for those people. Now, is that a concern for you at all or are you not really in that segment anymore? We are not currently, but we would love to.
Dhaval Ajmera: And I think there are a few changes which we as an association, Credai, has been pushing the government to really look into this and I'm hopeful that some things will come into order. The affordable driver or the affordable definition which is being currently there, which says that you have to have an apartment size of 45 square metres to 60 square metres or 45 lakhs, whichever is lower. Now, a 45 lakh apartment in Mumbai or let's say in MMR or let's say Bangalore or primarily Delhi will not be possible.
An affordable housing is supposed to be linked to the size of the apartment and not price of apartment. If we just change that definition, I think 60-70% of our real estate market will come into the affordable bracket, which will in turn change a lot of cycle in the real estate because directly, indirectly real estate contributes to one third of the GDP. And with that growth being phenomenally high and this definition will dramatically change the demand supply for real estate.
Govindraj Ethiraj: And that's because of access to lower interest rate loans and or something else?
Dhaval Ajmera: Absolutely. Access to lower interest loans, GST benefits which the customer will get. As a developer, probably we'll get income tax benefits and stuff like that.
So, it's overall making the cost lower and there has been enough and more demand. So, always I feel definition of any affordable housing or any other houses should be on the size because a luxury house will always be a thousand square feet or a 1500 square feet or a 2000 square feet. It cannot be 500 square feet or 600 square feet.
And it should be, that's the size which all of us, maybe I'm living in Bangalore, I'm living in Mumbai, I'm living in Gurgaon or wherever I stay, that's the size of the apartment which I'm looking at.
Govindraj Ethiraj: A lot of people feel concerned always about quality of infrastructure in Mumbai. I mean, what's your general sense on how infrastructure, when I may say infrastructure, I mean public infrastructure is keeping pace with the ambitions of companies and groups like yours?
Dhaval Ajmera: So, if you historically look how Bangalore, Hyderabad, Chennai, Gurgaon has developed over the last 15-20 years is primarily because there was a great infrastructure which was possible and which was done and that is why and obviously IT sector moved in and then the boom of real estate and the demand over there, public really started. Mumbai was struggling to do this in infrastructure terms over the last few years. But if you now look over the last five years, it has been a dramatic shift in terms of the coastal road, in terms of the metros, in monorails, the expressways, the freeways.
I think it's just making the entire suburb come together and become nearer to each other and that is why we are seeing a lot of real estate development significantly taking place in every suburb of Mumbai. So, be it Malad, be it Andheri, be it Bandra, be it Worli, be it wherever, that is the whole reason because today, if I have to go to probably from Worli, if I have to go to airport, I would probably take 45 minutes but now thanks to the metro, I'll reach in 15 minutes. So, that's the dramatic shift.
Now, coastal road has significantly changed a lot of things. So, I personally believe that infrastructure has a very, very big role in the growth of real estate and vice versa and for the city as well. So, with this infrastructure growth happening, I think Mumbai is poised to look at significant rise in real estate in the coming years.
Govindraj Ethiraj: When you say metro, I'm assuming you mean the metro that will start in March next year.
Dhaval Ajmera: Yeah, I mean every metro. So, just example, even if you take an example of the current metros like from Andheri to Malad and all the way the highway which has actually started. Today, I have a lot of people from my office.
In fact, one of our managing director, he travels in metro because it is easier for him and it saves a lot of time because he stays in Ghatkopar in the suburb and he comes to Andheri to our office. It is taking him 40 minutes to actually reach from door to door whereas if he travels by car, it's one and a half hour to one hour, 15 minutes to one and a half hour. So, it really makes sense and a lot of our people who've been working with us staying in Boorivali or Kondivali, it is easier for them to travel in metro rather than going in car.
So, it is dramatically changing the lifestyle and I believe in next five years probably, you know, all of us would probably take a metro like how people do it in London or New York and that's how it's going to happen.
Govindraj Ethiraj: Naval, it was a pleasure talking to you. Thank you so much for joining me. Thank you.
Dhaval Ajmera: Pleasure talking to you too. Take care.
Record Indians Migrate
A record 560,000 Indians migrated to OECD (Organisation for Economic Co-operation and Development) countries in 2022 — a jump of more than 30% compared to the previous year.
The top three destinations for Indian migrants were the United States, United Kingdom, and Canada
This rise in migration represents nearly 8% of all migration flows to OECD nations in 2022, excluding humanitarian migrants, revealed the 2024 OECD migration report, quoted by BS.
India maintained its lead as the top source of new migrants,with China following at 3.2 lakh. Indians made up 6.4% of all new immigrants to OECD countries, while China contributed 3.8 per cent.
OECD includes 38 countries such as the United States, Canada, Germany, Japan, the United Kingdom, and Australia, many of which are highly developed economies.
Meanwhile, the number of Indian students at US colleges surged 23% last academic year, overtaking China to become the top sender of international students for the first time since 2009 and driving enrollment to an all-time high.
India sent 331,602 students to study at US colleges in the 2023-2024 school year, according to Open Doors data from the Institute of International Education.
Overall, the number of foreign students rose 7% to more than 1.1 million, surpassing the all-time high set just prior to the pandemic.
China posted a 4% decline to 277,398 students, but still sent the second most students to the US.
International students, who usually pay full freight for attending US colleges, made up 6% of the total US higher education population and contributed more than $50 billion to the US economy in 2023, according to the US Department of Commerce.
