Markets Pause After 7 Day Run
The BSE Sensex and NSE Nifty were both down following dampened sentiments and shades of geopolitical risk following a terror attack in Jammu and Kashmir
On Episode 565 of The Core Report, financial journalist Govindraj Ethiraj talks to Vandana Hari, energy analyst and founder of Vanda Insights.
SHOW NOTES
(00:00) The Take
(01:00) Markets pause after 7 day run
(02:10) HUL, Nestle results point to continuing weak signals in domestic economy
(06:02) China says no tariff talks
(07:10) America wants India to buy more LNG but striking deals involve some navigation as deals tend to be long term and different from oil
(20:10) Vietnam’s EV car maker Vinfast says India factory will open in June and cars will launch later this year
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 Friday, the 25th of April and this is Govindraj Ethiraj Headquartered and broadcasting as well as streaming from a warm Mumbai, India's financial capital. Our top stories and themes.
The stock markets pause after a seven-day solid run.
Hindustan Unilever and Nestle results point to continuing weak signals from the domestic economy.
China says there are no tariff talks with the US at this point.
America wants India to buy more liquefied natural gas or LNG but striking deals involves some navigation as deals tend to be long-term and different from oil.
And Vietnam's EV maker Winfast says the India factory will open in June and cars will launch later this year.
The Markets Halt A Seven-Day Winning Run
The BSE Sensex and NSE Nifty were both down following dampened sentiments and shades of geopolitical risk following a terror attack in Jammu and Kashmir. The BSE Sensex opened lower, traded above 80,000 for a while but then closed down 315 points at 79,801. The Sensex had risen 6,269 points in the last seven days.
The NSE Nifty 50 index was down 82 points at 24,247. Hindustan Unilever was the major loser in the Sensex 30. The stock fell about 4% after it reported a marginal drop in Q4 net profit, that's quarter 4 and more on that shortly.
The BSE Midcap index was also down but only slightly as was the small cap index. The rupee was higher on Thursday by 0.2% at Rs. 85.26 to the US dollar compared to its previous close of Rs. 85.42. The rupee had slipped to an intraday low of Rs. 85.66 during the session but managed to recoup losses as it failed to move, as a foreign bank trader told Reuters, beyond the crucial support zone of 85.70 to 85.80.
Domestic Demand Signals Are Weak
It's usually the other way around. Nestle SA and Unilever, the parent companies of Nestle India and Hindustan Unilever, have beaten sales estimates led by price increases right now. But in India, both companies reported weaker Q4 profits on Thursday. HUL has also cut its margin forecast amidst high input costs and sluggish urban demand, Reuters reported, attributing it to a rise in cost of living and slow wage raises, which in turn have eroded urban consumers' purchasing power.
Consumer goods companies are also grappling with high input costs, Nestle, which makes Maggi instant noodles, has reported margins down from 18% last year to 16%, while Lever's reported a 30-base point fall to 23.1%, according to Reuters compilation. Lever's officials said that they will post core margins in a 22-23% range in the near to mid-term while boosting sales gradually on volume growth in the current financial year, thus also suggesting that they would focus on volume growth. The projection is below its previously forecast range of 23-24%.
Nestle India said its quarterly profit fell about 5.2% to Rs. 885 crore, thanks also to higher prices of commodities like coffee and cocoa. Nestle owns brands like Nescafe and recently launched Nespresso brands of coffee and KitKat chocolates.
Nestle's revenue growth slowed from 9% a year earlier to 4% now. Back to HUL, its expenses rose 3%, while revenue in its nutrition drinks and beauty products segments declined. Consumer product companies are now generally betting on lowered inflation, which we've seen, and some money flowing into the pockets of middle-class India, thanks to tax relief measures announced in the February budget.
HUL officials also said that this could lead to more spending on both essentials and discretionary goods. Speaking about discretionary goods, in some ways at least, some real estate news, prices of residential properties have increased by about 81% in the last five years in the Delhi National Capital region, with Greater Noida reporting the biggest surge, according to a report from real estate consulting firm Anaroc. Average residential prices in the Delhi NCR region increased to about Rs.
8,300 per square feet in the first quarter of 2025, that's the calendar, compared to about Rs. 4,580 per square feet in 2020. Some of these price increases are also likely a recovery.
Greater Noida recorded the highest residential price surge at 98%, with prices reaching Rs. 6,600 per square feet in Q1 2025, compared to Rs.3,340 per square feet in Q1 2020.
The Impact Of A Terror Attack Spreads
Pakistan on Thursday announced the closure of its airspace to Indian carriers, two days after a planned terrorist attack in Pahalgam, Jammu and Kashmir, which killed 26 people, most of them tourists. India's foreign secretary said that this was the worst attack on civilians in India in two decades, and India's foreign secretary said there was cross-border involvement in the attack. Executives from India's leading airlines, particularly Indigo and Air India, went into a huddle to devise alternative routes for their international flights that currently pass through Pakistani airspace.
An airline executive told Business Standard that the new flight paths, especially for services to Europe and the United States, will be longer and would increase their operating costs, which could lead to airfares rising. Airline executives also told the newspaper that Indian carriers faced a similar situation for over five months in 2019, after a terror attack in Pulwama, and they also said that if the airspace remains closed for a comparable period, the financial impact could be high. India has announced a series of measures to downgrade its ties with Pakistan on Wednesday, with Prime Minister Narendra Modi vowing to pursue the perpetrators to the ends of the earth.
China Isn’t Backing Down
China on Thursday said that there were no ongoing discussions with the United States on tariffs, despite indications from the White House this week that there would be some easing intentions with Beijing, according to CNBC. At present, there are absolutely no negotiations on the economy and trade between China and India, a Ministry of Commerce spokesperson told reporters in Mandarin, which was translated by CNBC. He also added that all sayings regarding progress on bilateral talks should be dismissed.
He said that if the U.S. really wants to resolve the problem, it should cancel all the unilateral measures on China. U.S. President Trump and Treasury Secretary Scott Besant this week said that there could be easing intentions with China, which was also reported by the Wall Street Journal. The Commerce Ministry's comments echoed those of Chinese Foreign Ministry spokesperson Guo Jiakun, who said on Thursday afternoon that there were no ongoing talks, according to state media reported by CNBC, and both spokespersons held the official line that China would be willing to talk to the U.S. subject to Beijing being treated as an equal.
The Natural Gas Drive in The Time of Tariffs
One area where India might possibly give in to the United States is to accept its demand for greater liquefied natural gas, or LNG, imports. India already imports LNG from the United States and imports have been rising in any case. The biggest chunk of India's LNG imports now comes from Qatar.
India wants to take its contribution of gas to the total energy mix to about 15% by 2030, that's in 5 years from now, from about 6% right now, which many analysts have said is a tough climb. To do that, India needs lots of gas and also the infrastructure to receive and distribute it since India's own gas production is less than 10%. Buying gas is not the same as oil and gas purchases are usually done in long-term contracts running into decades.
In February this year, the International Energy Agency said India's natural gas consumption could jump 60% between 2023 and 2030, doubling its need, that's India's need, for liquefied natural gas imports as domestic output is expected to grow much more slowly than demand. So India, as it happens, is the world's fourth largest buyer of LNG and will have to double annual imports by the end of the decade. All of that would equate to roughly India's current import terminal capacity.
Remember, LNG is transferred in special carriers. India, which is expected to be the biggest driver of global energy demand growth this year, will have to strategically plan its LNG procurement and expand import infrastructure to avoid exposure to spot market volatility, the IEA had said, and more on that spot market shortly. It also said that as legacy contracts expire, India faces a widening gap between contracted supply and projected demand after 2028, potentially increasing exposure to spot market volatility unless new long-term contracts are secured in the coming years.
The IEA said, and this was in February once again, that as legacy contracts expire, India faces a widening gap between contracted supply and projected demand after 2028, potentially increasing exposure to spot market volatility unless new long-term contracts are secured in coming years. Now, while India needs the gas, signing those right long-term deals also becomes important, which is obviously a little more tricky in a tariff-rich world as we are in right now. So how could India navigate this scenario and why is the LNG market so complex in general and compared to oil and what's at stake?
I spoke with Vandana Hari, energy analyst and founder of Vandana Insights based out of Singapore, and I began by asking her to walk us through India's current LNG import scenario in the context of India's energy demand, in gas that is, and also what India's current approach was.
INTERVIEW TRANSCRIPT
Vandana Hari: India has a pretty huge dependence on imports for LNG. India's own gas production is pretty limited. And on top of that, this import dependence is only expected to grow in the coming years because India wants to quite aggressively increase the share of natural gas in its energy mix.
Of course, it's cleaner burning fuel, it helps meet India's emission reduction goals. So if you look at 2024 data, India imported about 29 million metric tonnes per year of LNG, which was split roughly 75%, 25% term basis, so term being very long-term contracts and spot basis. So 75-25 is roughly the split.
Govindraj Ethiraj: Where were these mostly imported from? I know it's Qatar and the United States, and the United States has been growing, but what's the current mix like?
Vandana Hari: Yeah, so India imports from the Middle East. It also imports from Australia. I mean, these are all traditional suppliers of LNG.
The US is a relatively new supplier of LNG. So I don't have the exact figure to hand, Govind, but Indian imports of US LNG have been relatively small, growing nonetheless, which gives India a lot of scope and the US a lot of room to push much more of its LNG into India.
Govindraj Ethiraj: Right. So now let's come to the, I guess, the important point here, which is that you said 75% of imports are to long-term contracts, which run into decades quite often, but 25% is spot on. Take us through what are the price differences and the other strategic considerations that come into play when these contracts are negotiated?
Vandana Hari: I would like to compare and contrast crude imports. So we know India has a very high dependence on imports for crude as well, but something that shifted, and India used to maintain a relatively conservative ratio there as well. The whole idea of long-term contracts being supply security.
So of course, pricing is important, but supply security almost as important, if not more. So what we saw, for instance, with the Ukraine war and Russian crude being available at huge discounts to India, India quite rapidly grew the share of spot crude imports, because that was the only way, the practical way for India to increase the imports of Russian crude. And as a result of which now we've even seen up to 40% of Indian crude imports coming on a spot basis.
LNG is a I think India will remain, the preference will remain to go more with term LNG simply for security of supply. So India does buy on a spot basis. Typically what happens is in a term contract, you have some degree of visibility and certainty on what your LNG prices will look like.
So in the case of the US, they would typically be linked to Henry Hub gas prices. In the case of the Middle East, they could be linked to Brent. But when it comes to spot LNG, basically that's where importers have to be on their feet.
You have to be quick to jump into the market when you see arbitrage, when you see cheap, relatively cheap cargoes available. But on the other hand, then you also need flexibility in terms of storage. So these are two slightly different animals.
And I don't see that, the 75-25 ratio that I mentioned earlier, I don't see that changing dramatically for India. So if India is to buy more LNG from the US, I would think we are necessarily looking at India tying it up in terms of long term contracts.
Govindraj Ethiraj: What could happen then? I mean, now, if we were to bring in the trade angle to this and the tariff angle to this, what could potentially happen if we are tied to longer term contracts, which may be higher than other contracts? Or again, walk us through how the dynamics of this situation would play out.
Vandana Hari: That's a very important facet of this whole development. So these are G2G negotiations happening right between all the countries and the US with regards to tariffs. So for any government, there's a couple of key levers they can pull.
One is, of course, reducing the trade barriers, right? So reducing the import tariffs, for instance, or the customs duty, you might call it. Now, in the case of India, we know the government is looking at perhaps removing the 2.75% import duty it levies on LNG imports, all LNG imports, not just the US. But the government is considering that it could perhaps remove that just for the US. How that will make some of India's other LNG suppliers feel, you know, that's a different story. The other lever for the government to pull is to direct the state owned companies to a large extent, they do take directions from the government, instruct them to start buying more product from the US.
But that's where the economy gets into the picture. Because even if they are government run companies, you know, they all do operate with profit in mind. And they do look to buy the cheapest available material out there, whether they're importing LPG, LNG, crude, or what have you.
So this I think needs to play out, we need to see to what extent the government will perhaps just sort of nudge them, encourage them, or will it be something more stronger than that in terms of just actually directing the companies to go ahead and sign this deal, keeping the economics maybe to the side. It remains to be seen what tank the government takes.
Govindraj Ethiraj: Yeah, you know, as you said, the logistics of gas are such that you need to be tied to longer term contracts. I mean, the fact that you have to bring them in your account for storage and so on. But if I were to ask you to use the crude example again, let's say if crude is at $67 per barrel right now, rent, if I were to be buying long term, the equivalent in gas, what would I be paying as a percentage discount versus buying it on the spot?
Vandana Hari: So absolutely. And that is a very key consideration for Indian buyers. If you're buying long term LNG based on crude prices, not just today's prices, but generally the outlook whether you know, you look at any of the forecasts through 26 as well, progressively, the forecast for average crude prices have been lowered.
So, you know, crude in the 60s, LNG imports tied to that and the sort of formula that we have seen in recent years makes LNG very affordable, economical and almost desirable, I would say for India. But if you were to link it to Henry Hub prices, let's say if you're buying long term US LNG, which will be the case, it's unlikely that it will be linked to then you see Henry Hub prices will follow their own market dynamics. And there, you know, there are some concerns amongst buyers, not just in India, but across Asia, that as the US adds more and more LNG capacity, the US is set to double its LNG capacity between now and the end of this decade.
So that will create more demand for US gas. So Henry Hub prices may not be as low. So if you see it three or $4 MMB to you today, you know, that will not be the case in future.
And that's going to be a major consideration as well for buyers.
Govindraj Ethiraj: So if you were to look ahead, and you also said that, you know, there are other countries we could be buying from, you mentioned Australia, for example, how would all of this affect our relations? And I'm talking strictly about business relations right now. And how could we potentially navigate this?
If we are likely to buy more from the United States?
Vandana Hari: Look, the most important thing in this big picture is where is capacity being added? So as I mentioned, the US is poised to and this is where let me just take a step back to explain the context is that the US is basically a shale driven boom in oil production that seems to be subsiding, but the shale driven natural gas production boom is still stretching ahead in front of that country. So the US is actually, you know, even without these tariffs and is a natural incremental LNG supplier for the whole world.
So the US has a capacity of about 88 million metric tonnes per year. Currently, it's going to be double that by the end of this decade. So it makes sense for India to be buying more.
That would have the case even without the tariffs. If you look at Australia, another key supplier, there isn't much LNG capacity being added in the coming years. So that's constrained.
Qatar is the other one. So Qatar has been an important LNG supplier for India. It is also growing its capacity.
In fact, Qatar and the US is pretty much the two big giants that are going to continue adding capacity. So I think the point in your question is that Qatar will probably be felt the most put out if India were to go to remove the tariffs only for the US and buy much more US LNG than it does from Qatar. So I think that's where the strongest sort of competition or rivalry will be.
Govindraj Ethiraj: As I understand, we are in single digits when it comes to domestic production of gas in India, and more than 90% would be imported. So are you getting a sense that Indian domestic production could increase or is that following a natural progression in terms of growth?
Vandana Hari: Unfortunately, the story on that front is not going to change for India. India has pretty mature basins, limited reserves of oil and gas. I do subscribe to the argument that maybe the case is slightly different in oil and gas.
So for oil, pretty much India may have exhausted all the reserves that are to be found and exploited, but not so for gas. So there is more gas potentially waiting to be discovered in India. But a lot of this, Govind, is offshore, deep offshore, which is a very, very expensive proposition in terms of exploration and certainly in terms of development and commercialisation of those reserves as well.
So I don't see that changing for India. So India would. And given that it wants to increase the gas share from 6% to 15%, that's a relatively modest goal, I would say.
It wants to do that by 2030. I think LNG is the way to go.
Govindraj Ethiraj: Vandana, pleasure speaking to you as always. Thank you so much for joining me.
Vandana Hari: Thank you, Govind.
WinFast Goes Fast
Vietnamese electric vehicle maker WinFast is planning to open its car assembly plant in Tamil Nadu by the end of June, the company's CEO said on Thursday, according to a Reuters report. He told shareholders of its parent company, Win Group, that in the near future, apart from the Vietnamese market, they would focus more on Indonesia, India and Philippines. WinFast is a NASDAQ-listed global rival of American EV giant Tesla and had selected Thoothukudi in Tamil Nadu for its $2 billion facility.
The first phase of the project will see a $500 million investment with a plant expected to have an annual production capacity of 150,000 vehicles and is likely to start EV production in 2026, according to that Reuters report. WinFast will also develop the entire EV ecosystem in India, including battery manufacturing and setting up of charging stations across India. Earlier, WinFast had said they had chosen Tamil Nadu because of its proximity to a seaport and airport, which will make exports easier.
The CEO had said that they have two factories in Vietnam, one is 50,000 cars and another around 100,000, and they're looking at India for the domestic market and exports to West Asia and Africa. At the Bharat Mobility Global Expo 2025, the company had unveiled two all-electric premium SUVs, the VF7 and VF6 for the Indian market, and these are expected to be launched later this year. Chinese EV car maker BYD is also in India but not manufacturing cars, rather importing them.
Its factories, also near Chennai, are manufacturing other components of the electric vehicle ecosystem. At this point, Tesla has said it's still figuring out how and when it'll start bringing its cars to India through the export route and is most likely awaiting a firm announcement on tariff reductions from over 100% right now. The company has leased showroom space in Mumbai and Delhi and there is no specific talk of manufacturing as yet.
