Markets Recover, But On Weak Footing
The stock markets recovered from the drubbing on Friday, tracking in anticipation a recovery on Wall Street overnight
On Episode 383 of The Core Report, financial journalist Govindraj Ethiraj talks to Shantanu Rooj, founder and CEO of TeamLease Edtech.
Our Top Reports For Today
SHOW NOTES
(00:00) The Take
(04:41) Markets recover, but on weak footing
(06:15) Morgan Stanley cuts oil price projection once again
(07:20) Cut in Gold Import Duties To Boost Domestic Business
(10:10) Iron ore prices fall below $90 a tonne
(10:57) Thumbs up for the Indian market as Carrefour returns after leaving in 2014
(11:38) Why placement salaries at IITs are hitting new lows
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 regards any feedback, you can drop us a message on [email protected].
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Good morning, it's Tuesday, the 10th of September and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
The Take
Here’s a quick quiz question. How many IITs are there in India and where are they?
Chances are you would say Kharagpur, Kanpur, Delhi and Mumbai (Bombay) and maybe Chennai (Madras).
That is five if you got them all. There are actually 23 IITs in India now.. The first was set up in 1951 in Kharagpur and there was some gap between the first five and the sixth.
By the way there are also 25 IIITs or Indian Institute of Information Technologies, some well known and some not and also occasionally confused with IITs.
Next question, how many Indian Institutes of Management (IIMs) do you know of or can recall ? Am I guessing Ahmedabad, Calcutta (Kolkata) and Bangalore, Kozhikode..and then?
Answer, there are 21 IIMs now in India.
Last question, how many All India Institute of Medical Sciences (AIIMS) do you think there are and can you name them ?
Well, most I would think will name the AIIMS at Delhi and then nothing else, unless of course if you live next to one.
So there are 23 AIIMS in India of which some are still under construction.
A promoter of a steel company in Maharashtra once told me industries in India can go to overcapacity very quickly, so much so that it becomes uneconomical and unviable for everyone very quickly.
This includes television news, where there are close to 390 news channels and it is a recurring mystery how they survive, even accounting for vanity capital.
It didn’t strike me until Shantanu Rooj of TeamLease Edtech who joined me later in the show pointed out that what we are seeing now is perhaps the early signs of overcapacity and brand dilution.
Do note I am not arguing against more medical, engineering or management seats but the clubbing of them under the IIT or IIM brands.
By the way, do you know how many B Schools there are in India? Well, it depends on whom you ask because the answer can vary between 3,000 and 6,000.
I once asked a senior professor at an American Ivy League college why they were not expanding into India.
He explained at that time while they were exploring campuses in a few locations and would like to in India if regulation permitted, it would always be clear that these campuses were satellites of the main institution.
His point; there can be only one Stanford, Harvard or Columbia.
Admittedly, the nature of education delivery has changed in recent years.
The Ivy Leagues now have several layers of offerings, ranging from online and offline or hybrid executive programmes to entirely online programmes.
I have often noted certificates with a Harvard Business School logo hung on the walls of office cabins of people I have visited which on closer inspection turn out to be an advanced management programme and not the full degree.
But this deluge of options has not, at least in my understanding, diluted the core brand and proposition.
Possibly also because there is careful delineation of courses and offerings, even as more students are sought out. Or the original brand can withstand some dilution thanks to growth because it's been around for a few hundred years.
Whatever the reason, it is clear that the Indian institutions being the IITs, IIMs and AIIMs are seeing a dilution though the original few still stand out because of their strong faculty, research strength and of course body of work.
For example, which IIT’s civil engineering department do you think the Government calls if they want a second view on some engineering linked issue, like a collapsed bridge?
The way forward perhaps is to do a proper brand audit including performance audit of these newly minted colleges both from a student and prospective employer point of view.
It does not seem somehow logical that institutions of learning can be replicated at such a scale without compromising on a host of factors.
Institutes of learning are not assembly line automobile factories which can be replicated and expanded almost with the push of a button.
That brings us to the top stories and themes of the day:
Markets recover, but on weak footing.
Morgan Stanley cuts oil price projection once again.
Cut in Gold Import Duties To Boost Domestic Business
Iron ore prices fall below $90 a tonne.
Thumbs up for the Indian market as Carrefour returns after leaving in 2014.
Why placement salaries at IITs are hitting new lows.
Markets Hold Up
The stock markets recovered from the drubbing on Friday, tracking in anticipation a recovery on Wall Street overnight.
On Monday, the Sensex and Nifty 50 closed higher even then Asia was down, following the Friday fall on Wall Street.
The BSE Sensex, see-sawed a bit before closing up 375 points at 81,560 while the Nifty 50 moved similarly before closing up 84 points at 24,936.
The bigger news of course is what is happening in the primary markets.
The Bajaj Finance was oversubscribed on day one, perhaps no surprises there.
Yesterday we spoke of what could happen if companies and promoters get too greedy and extract more from investors than they can stomach or are unable to meet their expectations.
Well, both secondary and primary markets could turn weak, as has happened before.
Meanwhile, Pranav Haldea of Prime Database told Business Standard that the Indian markets were on track for the best ever IPO year.
Which is of course good news for the companies that are raising but a tad worrying given we don’t know how much the markets can absorb.
During the first eight months of calendar 2024, 50 IPOs mobilised Rs 53,453 crore, already surpassing last year’s tally of Rs 49,435 crore.
The year 2021 was a record year for IPO mobilisation with 63 companies raising Rs 1.19 trillion or Rs 119,000 crore.
But investors were not investing as heavily in mutual funds or in derivatives or in secondary markets that year.
Oil Prices Are Projected To Stay Low
Morgan Stanley has reduced its Brent crude price forecasts for the second time in a matter of weeks, as demand challenges mount while supplies remain plentiful, Bloomberg is reporting.
Crude prices will average $75 a barrel in the fourth quarter, according to a note from the firm’s analysts.
Overnight, crude prices were quoting under $72 or around $71.57 a barrel.
Morgan Stanley last month projected $80 a barrel between October and December, pulling back from its earlier outlook for $85, Bloomberg said.
Crude prices have dropped to their lowest close since late 2021 on consistent signals of weaker Chinese demand and the possibility that the US economy is slowing.
Prices are holding low despite the OPEC+ to defer a plan to increase output.
Cut in Gold Import Duties To Boost Domestic Business
Revenues of organised gold jewellery retailers will increase 22-25% on-year this fiscal, much higher than the 17-19% expected earlier, a new report from Crisil Ratings has said.
This follows the reduction in import duties announced in the full Union Budget.
The incremental growth will be driven by higher volumes even as retail gold prices come down from their lifetime highs, Crisil Ratings has said.
From a gold jewellers point of view, the sudden price decline could lead to some inventory loss on existing stock, though its impact would be partially mitigated as improved demand reduces spending on marketing and promotional campaigns, Crisil said
CRISIL Ratings analysed 58 gold jewellery retailers, which account for a third of the revenue of the organised jewellery sector which in turn represents a little more than a third of the market, with the highly fragmented unorganised sector making up the rest.
Inflation Numbers Could Trend Lower
Indian consumer inflation numbers may drop to 3.5% according to a Reuters poll and thus below the Reserve Bank of India's 4.0% medium-term target.
A moderation in food prices, also linked to last year’s high base, may help.
Food prices, which make up nearly half the inflation basket, have already eased in the last two months though the threat of erratic monsoon rains harming crops remains.
The Sept. 4-9 poll of 53 economists forecast consumer price inflation at 3.50% in August from a year earlier, little changed from a five-year low of 3.54% in July.
Iron Ore Falls
Iron ore sank below $90 a ton for the first time since 2022, as Chinese demand falters further.
The fall in iron ore should be seein the context of other commodity prices declining, including base metals and crude oil also retreating in recent weeks, Bloomberg is reporting.
Goldman Sachs Group Inc last week reduced its copper forecast by $5,000 a ton, after projecting some $15,000 a tonne in the next year.
The present forecast is around $10,000 per tonne next year.Copper surged to fresh highs above $11,000 a ton in May.
Consumption of steel in China has slowed thanks to the country’s protracted real estate slowdown.
Carrefour Returns
This does not happen often. The roughly $100 billion French retailer Carrefour will re-enter India as it has entered into a franchise partnership with Apparel Group.
The brand will initially focus on North India with plans for a nationwide expansion. The first Carrefour locations are planned to open in the NCR Region in 2025, Reuters reported.
Carrefour had exited India in 2014 after operating for four years.
Carrefour is one the world's largest retailers with 14,000 stores in close to 40 countries, previously trying to conquer the Indian market through a partnership with another local retailer.
Placement Season Blues
Placement season has not been very good at IIT Bombay with some packages dropping to as low as Rs 4 lakh a year, though the average annual package stood at Rs 23.5 lakh, higher than last year, according to a report in the ET.
The placement percentage recorded is apparently around 75%, unlike higher numbers in previous years.
A similar story played out at IIM A’s one year PGPEX programme, usually for students with work experience, with maximum earning potential dropping to around Rs 54 lakh, a six year low compared to a high of around Rs 1 crore last year.
So what are the broader trends here and how is this reflective of the overall job market and what is the way ahead.
I reached out to Shantanu Rooj, CEO of TeamLease Edtech, an upskilling and training company and began by asking him what was happening.
INTERVIEW TRANSCRIPT
Shantanu Rooj: Govind, actually, these numbers are really accurate. I mean, today we are talking about it, and this is coming in the limelight because IIT Bombay spoke about it, but the issue has been there for quite some time now. if you look at the trends right from 2019 for example, just before covid and maybe few years before, most IITs have been seeing a declining trends in terms of their campus placements, their success rates as well as the packages. Obviously, during covid, there was a temporary bump up, but then actually it's coming back to that. I think that this is a trend which is there with most IITs is going to stay.
Govindraj Ethiraj: And what is driving this?
Shantanu Rooj; So this problem is an animal with two heads. One side lies within the IITs. There are certain challenges in what is being taught inside IITs, and how are they being taught, right? So the curriculum hasn't seen lot of modernisation at this point in time. Number two, even the pedagogy hasn't gone through a lot of change. Most IITs today still teach students inside physical classroom. That's a challenge. Today, employers demand a lot of evidence of skills, evidence of work experience, evidence of internships, apprenticeships. They're all lacking. I mean, I think that has to change. If you look at from the employer's perspective, number one, the number of IITs today have grown. A few years back, used to have just about six IITs. Today, we have approximately about 25-26, which means that they are not that coveted lot. Only few of them are available. And there's a demand supply-challenge. Today there are ample number of IITs and ample number of IIT graduates are available. Number one. Number two, the global problem, the turmoil that we all see, the geopolitical, geo-economical situations, actually, is also driving some part of the temporary break. For sure, I think it's a two headed animal.
Govindraj Ethiraj: And is this something that applies to B-schools? Because we also saw reports that placement packages for IIM Ahmedabad, PGPX, that's the one year MBA was down by almost half.
Shantanu Rooj: Yes, there is a trend there too, but I'm not too sure that these two trends are interrelated. The packages problem at the B-schools largely is because of the global situations today, and that the large multinational, large global companies are not hiring, are not willing to pay the packages that they used to pay out here. The reason behind that problem in the B-schools is different than what's happening in the IITs.
Govindraj Ethiraj: So coming back to its now, this obviously, if it's IIT, then it's also extends to other engineering colleges, because there are lots of other good colleges, and then there are other engineering colleges.
Shantanu Rooj: That's true. But then, if you look at it, most other engineering colleges, apart from IITs, already had this problem. For example, look at a typically category two engineering college, the placement rates was hovering around 60-65% that must have come down by a few small percentage points. So the disappointments is not that high, because you didn't expect 100% placements. Whereas in IITs, we expect 100% placements, and we are all sometimes startled by the type of packages that we all hear, right a Pro-Plus packages given to the top 10-12 students, we possibly miss out what's happening to the bottom 10% bottom 20% of the students. I think the disappointment is more in the IITs, where the fact is similar in the other engineering colleges as well.
Govindraj Ethiraj: So there are two components. One is the compensation, which, at least at the lower end, clearly has dropped, or seems to have dropped, and the other is jobs. So are you saying that both are a question. I mean, even if, let's say compensations are down, is everyone getting a job? I mean, in one is the IITs and then all the other colleges.
Shantanu Rooj: It is. I mean, both are pro in terms of one is the quantum of the compensation has come down. But in terms of the jobs, I think they're lesser jobs. But most IIT students aspire to end up in an IT company or in a consulting company or some other agency. So that's their aspiration. Most engineers coming out of the IIT do not want to enter core engineering. A civil engineer still wants to go to end up into one of the top IT companies there. That's a challenge, if the engineers actually reconciled to the fact that if I'm a mining engineer, I must end up in that industry. If I'm a civil engineer, I must end up in that industry. Then there are ample number of jobs. I mean, Indian domestic consumption story is true. I mean the manufacturing growth in India is actually true. So I think there are jobs available, the type of jobs which meets the aspiration of the students. I think that's better.
Govindraj Ethiraj: So how do you see this evolving Shantanu in the next couple of years? I mean also in terms of what students should be doing or how they should be aligning themselves with job market.
Shantanu Rooj: So Govind, in my mind, this is not a passing shower. This is climate change for the placements in IITs. This is going to stay forever, unless we change ourselves. Students must ensure that their CVs are brimming with evidences of work experience, they must pick up all possible chances, or all possible opportunities to take up project work, internship, practical, hands on experience and, most importantly, soft skills. This is one thing which IIT engineers really, really lack. In the interviews, most employers have told us that some of the students, where they showcase a lot of technical skills, when it comes to communication, teamwork, when it comes to the way they present themselves, the personality, the grooming, all of these things really sucks. I think that's where there is a lot of room for improvement.
Govindraj Ethiraj: From your time you're also an IIT graduate, as I can see, what's fundamentally changed or not? Changed. You talked about syllabus and curriculum, which you said is not changed, but what has
Shantanu Rooj: One is the entire world of work has changed from what it used to be expectation of employers 20 years back was very different than the expectation of employers today, their world of work is actually getting disrupted by everything that we have been talking about all this while, employers are so uncertain about their own future, they are not sure what type of people they should actually hire. So hence, the premium for a technical skill is now coming down. Employers want people who are more adaptive, people who showcase learnability, people who can showcase a combination of hard skill and lot of soft skills. Satya Nadella famously talked about it a few weeks back, saying that in most of the Microsoft interviews, they are looking at soft skills, as importantly as hard skill. I think all of these things have changed that wasn't the condition 20 years back.
Govindraj Ethiraj: Right. Shantanu, thank you so much for joining me.
Shantanu Rooj: Thank you so much for having me.
