Markets Set To Rise In Volatile Trade On Vote Counting Day
The key indices, the BSE Sensex and Nifty50, clocked their biggest one-day rally ahead of Lok Sabha elections results since 2009
On Episode 309 of The Core Report, financial journalist Govindraj Ethiraj talks to Gaurang Shah, head of investment strategy and senior vice president at Geojit Financial Services.
Our Top Reports For Today
SHOW NOTES
(00:00) Stories Of The Day
(01:57) Markets set to rise in volatile trade on vote counting day
(11:56) Oil prices fall further, now below $79
(13:28) How India’s renewed plans for a manufacturing thrust could play out
(15:10) Aviation goes places in 2024 with close to 5 billion travellers and $1 trillion in revenues projected
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.
---
Markets Hit Record Highs
The key indices, the BSE Sensex, and Nifty50 -- clocked their biggest one-day rally ahead of Lok Sabha elections results since 2009 or in 15 years.
The 30-stock Sensex index jumped 2,507 points, or 3.4 per cent, to end at 76,469 levels, while the Nifty50 jumped 733 points, or 3.25 per cent, to close at 23,264.
The Sensex and Nifty also hit record highs at 76,739 and 23,338, respectively.
The Core Reported had projected a 2% plus jump on Monday morning.
Business Standard reports the last time the benchmarks logged their biggest single-day rally ahead of election results was in 2009, when they jumped 2.46 per cent.
Government linked or government investment linked stocks were leading the rally prompting concerns of overvaluation once again in these areas and more of that in a moment.
State Bank of India was the top gainer on the Sensex index, soaring nearly 10 per cent. This was followed by NTPC, Power Grid, L&T, Axis Bank, RIL, Ultratech Cement, and M&M.
The markets buy on rumours and sell on news usually. The big question is what will happen in trade on Tuesday.
While an up move is very possible, it is also possible that some consolidation and correction will set in. Remember, a victory for the current Government is priced into the current levels of the market.
On the other hand, several macro indicators are set to balance out some possible slowdown in momentum.
I spoke with Gaurang Shah, Head of Investment Strategy and Sr VP at Geojit Financial Services last night and asked him how he was looking at the market following the big jump on Monday and what sectors and themes he was more bullish on at these levels.
—
Meanwhile, the rupee ended at 83.14 against the dollar, rising nearly 0.4% on day, to mark its best single-day gain in more than five months.
The benchmark 10-year government bond yield ended at 6.94%, its lowest closing level since April 7, 2022, down 4 basis points on the day, Reuters reported
Oil Price Slump Again
Oil prices fell after OPEC+ unexpectedly said it would restore some production to the market this year, adding to the bearish momentum crude has been experiencing for months.
This means that instead of the supply cuts that were supposed to be extended, the OPEC countries would pump more oil thus adding to supply.
Not surprisingly, crude oil prices fell.
Global benchmark Brent crude futures slipped as much as 2.9% to dip below $79 a barrel, while West Texas Intermediate fell below $75 a barrel. Both benchmarks are at their lowest prices since February, Bloomberg reported.
Apparently now, OPEC and its allies will start rolling back some production cuts starting in October, earlier than many market watchers had expected.
The curbs will continue in full in the third quarter, before gradually phasing out over the following 12 months.
Oil prices have been soft in the last two months as geopolitical risks appear to have lowered as has demand.
Bloomberg quoted Goldman Sachs saying the OPEC decision was bearish, given a recent increase in inventories, but UBS Group AG and RBC Capital Markets LLC expressed confidence the alliance will maintain control of the market.
Most analysts, as we referred to earlier, had expected OPEC+ to extend the curbs through to the end of the year.
India’s Manufacturing Thrust
Indian Prime Minister Narendra Modi plans a raft of business-friendly measures if he wins a third term today, including pushing through regulations making it easier to hire and fire workers, government officials told Reuters.
In what appears to be a clear manufacturing thrust and also flows with markets in general are expecting if you just heard Gaurang Shah of Geojit, the Government will offer subsidies for domestic production modelled on recent packages for semiconductor firms and electric vehicle makers, said the officials.
At this point, less than 3% of global manufacturing takes place in India, compared to 24% for China, Reuters said quoting World Bank data.
The government plans to increase India's share of global manufacturing to 5% by 2030 and 10% by 2047, according to an internal document seen by Reuters.
The Government also plans to reduce import taxes on key inputs for locally-made goods, which have pushed up India's manufacturing costs, the officials said.
This will be significant as tariffs have tended to go up and stay there in recent years.
Prime Minister Modi's reelection campaign was partly built on the promise of continued economic development and he is pitching India as an alternative for global firms diversifying their supply chains from China, said Reuters.
Manufacturing capacity is key to addressing the larger jobs challenge.
India is the world's fastest-growing major economy. But that includes both a booming tech sector and a struggling older economy that doesn't provide enough jobs for everyone else, Josh Felman, the former head of the International Monetary Fund's office in India told Reuters, adding.
"What can be done now to provide employment - good jobs for these people - is manufacturing," Felman said.
Airlines Set For Bumper Year
The International Air Transport Association (IATA) has announced strengthened profitability projections for airlines in 2024 compared with its June and December 2023 forecasts.
With 4.96 billion in 2024—a record high, total revenues for the industry are expected to touch almost $1 trillion dollars or $996 billion with net profits expected to touch $30.5 billion in 2024 (3.1% net profit margin).
That will be an improvement on 2023 net profits which are estimated to be $27.4 billion (3.0% net profit margin). It is also an improvement on the $25.7 billion (2.7% net profit margin) forecast for 2024 profits that IATA released in December 2023.
Total air cargo volumes are expected to reach 62 million tonnes in 2024.
Passenger revenues are expected to reach $744 billion in 2024, up 15.2% from $646 billion in 2023.
Revenue passenger kilometres (RPKs) growth is expected to be 11.6% year on year. The long-term 20-year growth trend is expected to see passenger demand grow 3.8% annually for the 2023-2043 period.
Passenger yields are expected to strengthen 3.2% over 2023.
The average passenger load factor is expected to be 82.5% in 2024. This is largely in line with pre-pandemic levels (82.6% in 2019)
Weather Disruptions
With record-breaking rainfall on Sunday, causing widespread disruptions, Bengaluru shattered its 133-year-old record for the highest single-day rainfall in the month of June.
The city received around 111 mm of rainfall on Sunday evening, making it the highest-ever rainfall in a single day in June. Over the past two days, Bengaluru received 140.7 mm of rain, surpassing the average of 110.3 mm of rainfall in June, according to a report in The Economic Times.
Counting Of Votes
AND FINALLY Votes for the Lok Sabha elections 2024 will be counted on Tuesday, June 4, that is starting this morning.
The counting will also include the simultaneous Assembly elections in Odisha and Andhra Pradesh, as well as by-elections for a few assembly seats in other states. The votes for the state elections in Sikkim and Arunachal Pradesh were counted on Sunday, June 2.
According to the Election Commission of India (ECI), the counting of votes for the 2024 Lok Sabha election and the state polls will begin at 8 am on Tuesday, June 4, and will continue until the last vote is counted.
