Markets Slide Again, Three Trading Days To Go
The markets are alternating between bouts of nervousness and confidence in recent days, as we have three trading days to go before the results of General Elections 2024 are announced
On Episode 305 of The Core Report, financial journalist Govindraj Ethiraj talks to Sandip Bansal, associate director and senior portfolio manager, ASK Investment Managers as well as Anumita Roychowdhury, executive director at Centre for Science and Environment, India.
Our Top Reports For Today
SHOW NOTES
(00:00) Stories Of The Day
(01:00) Markets slide again, three trading days to go.
(03:05) How does one pick stocks or themes in a heated market?
(13:16) S&P revises India ratings outlook to positive
(18:40) Air Cargo continues to grow globally, reflecting economic upturn
(19:41) Heatwaves are slamming cities across India, Delhi hits all time high of 52.3 C. How should we be responding?
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.
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Markets Sliding Away
The markets are, if you take a step back, alternating between bouts of nervousness and confidence in recent days, as we have three trading days to go before the results of General Elections 2024 are announced.
Both emotions are to be expected and also extend to the fear and greed that usually drive markets in short or long spells.
And it also boils down to should one buy, sell or do nothing.
Well, some institutional investors are clearly saying you should take some profits off the table because that is the sensible thing to do if you have been invested in for a while.
It is equally sensible to do nothing if you are a believer in the longer term story of this market, which I am for example.
That presupposes you have placed your savings in the hands of competent fund managers or you yourself have done your diligence in the stocks you have invested.
And how indeed do you pick stocks or managers to manage those stocks. More on that in a moment with our guest for today.
Meanwhile, the markets fell with the BSE Sensex falling 668 points to end at 74,503. The Nifty50, on the other hand, closed at 22,705.
In percentage terms the swings are quite small, something Aditya Birla Sun Life Mutual Fund CEO A Balasubramanian pointed out to me a few weeks ago when the market had crossed 75,000 and was exhibiting the first signs of jitteriness as the long polling season got under way.
On another note, I do wish politicians would stay away from commenting on markets and their movements or as we have seen trying to talk it up.
They have every right to say what they wish and I would concede they understand them well too but markets are markets and they don’t usually respond well to open calls to action and are driven by, as we said earlier, fear and greed.
And it's best to stay away, whether it is going up or down.
Incidentally, not all segments of the market were down on Wednesday, the BSE SmallCap index rose 0.23 per cent though the BSE MidCap index was down.
Hunting For Boys In Peak Market
So how does one pick stocks or identify long term gainers at a time like this and how does one treat valuations
I reached out to Sandip Bansal, Associate Director & Senior Portfolio Manager, ASK Investment Managers.
I asked Bansal, who runs the recently launched ASK Lighthouse Portfolio, a portfolio management service or PMS scheme that focuses on a few themes or sectors at a time, on how he was seeing valuations at this time before linking it to the larger question of how he was identifying sectors or companies at a time like this.
Which of course is the question many people ask me as well!
S&P Revises Outlook To Positive
Rating agency Standard & Poor (S&P) on Wednesday announced a revision in the outlook for the Indian economy from ‘stable’ to ‘positive’, while affirming the overall rating at ‘BBB-’, which represents the lowest investment grade rating.
The positive outlook reflects expectations of sustained policy stability, deepening economic reforms, and high infrastructure investment, which are anticipated to support long-term growth prospects.
Coupled with cautious fiscal and monetary policies, these factors could diminish the government's elevated debt and interest burden, bolstering economic resilience and potentially leading to a higher rating within the next 24 months, S&P said as quoted in a report in Business Standard.
In May 2023, S&P Global Ratings upheld India’s sovereign rating at ‘BBB-’ for the long term and ‘A-3’ for the short term, maintaining a stable outlook.
S&P then said sound economic fundamentals expected to support growth over the following two to three years, despite concerns over weak fiscal performance and low gross domestic product (GDP) per capita.
The S & P announcement aligns with similar ratings from other global agencies, including Fitch and Moody’s, which also assigned the lowest investment grade rating to India with a stable outlook, the BS said.
S&P also said it may raise ratings if India's fiscal deficits narrow meaningfully such that the net change in general government debt falls below 7 percent of GDP on a structural basis," the agency said.
It added that sustained public investment in infrastructure, combined with fiscal adjustments, could improve India's weak public finances. Additionally, a notable improvement in the central bank's monetary policy effectiveness and credibility, resulting in lower inflation rates, could also prompt a ratings upgrade.
S&P also warned that India's outlook may be revised to 'stable' if there was a decline in political commitment to maintaining sustainable public finances, indicating a weakening of the country's institutional capacity.
China To Grow Faster
China's economy is set to grow 5% this year, after a "strong" first quarter, the International Monetary Fund said on Wednesday, upgrading its earlier forecast of 4.6% expansion though it expects slower growth in the years ahead, Reuters reported.
The IMF's new projections come in the context of hectic efforts by China to ramp up its economy, fighting a protracted property crisis and its ripple effects across investors, consumers and businesses.
The IMF said it had revised up both its 2024 and 2025 GDP targets by 0.4 percentage points but warned that growth in China would slow to 3.3% by 2029 due to an ageing population and slower expansion in productivity.
It now expects China's economy to grow 5% in 2024 and to slow to 4.5% in 2025.
RBI Asks EdelWeiss ARC To Stop Acquiring Financial Assets
The Reserve Bank of India on Wednesday directed Edelweiss Asset Reconstruction Company Limited to stop the acquisition of financial assets with immediate effect on concerns observed during the course of supervisory examinations.
Meanwhile, earlier yesterday, a RBI deputy governor said some Indian asset reconstruction companies (ARCs) bypassed regulations and used “innovative ways” to evergreen distressed assets.
Such companies often lack transparency and consistency in issuing and periodically valuing security receipts. Their practices in levying management fees are inadequate, he said, in a report in Business Standard.
He was speaking at a conference in Mumbai for directors and chief executive officers of ARCs organised as a part of the central bank's supervisory engagement programme on May 17. The speech was published on the RBI website on Wednesday.
“During the course of our onsite examinations, we have come across instances where ARCs have been used or allowed themselves to be used, if I may say so, as a conduit to evergreen distressed assets. In many cases, there is a lack of transparency and consistency in the issuance and periodical valuation of security receipts (SRs). The practices surrounding the levy of management fees leave much to be desired.”
This move of RBI of course is in keeping with its generally aggressive stance of late but is not likely to impact the larger financial or banking system since ARCs operate in relatively confined zones.
The RBI has said it has been engaging with the senior management of these entities - the other one is ECL Finance- and their statutory auditors, but no meaningful corrective action has been evidenced so far, necessitating the imposition of business restrictions.
“Instead of taking meaningful remedial action to rectify the said deficiencies, it was observed that the group entities were resorting to new ways to circumvent regulations,” the RBI release said.
This is of course a worrying statement.
Nevertheless, the central bank said it will review the business restriction on the companies after the rectification of the supervisory observations by the group to the satisfaction of the RBI.
Air Cargo Continues Double Digit Growth For 5th Month
The International Air Transport Association (IATA) released data for April 2024 global air cargo markets which showed that total demand measured in cargo tonne-kilometres (CTKs*), rose by 11.1% compared to April 2023 levels (11.6% for international operations).
This is the fifth consecutive month of double-digit year-on-year growth.
Capacity also rose by 7.1 compared to April 2023 (10.2% for international operations).
IATA said that air cargo demand started Q2 with a solid 11.1% increase. While many economic uncertainties remain, it appears that the roots of air cargo’s strong performance are deepening, the agency said.
Asia-Pacific airlines saw 14.0% year-on-year demand growth for air cargo in April – the strongest of all regions.
Demand within the Asia market grew by 13.2% compared to April 2023, and the Asia-Europe route grew by 17.7%.
Heatwaves
Delhi,specifically a locality in Northwest Delhi recorded its highest-ever temperature at 52.3 degrees Celsius on Wednesday.
According to the India Meteorological Department, the automatic weather station at Mungeshpur has recorded the temperature around 2.30 pm.
This was a day after Mungeshpur and North Delhi’s Narela clocked their maximum temperature at 49.9 degrees Celsius.
A new study by Delhi-based think tank Centre for Science and Environment (CSE) has revealed a dangerous trend in India’s biggest cities:
Heat waves are becoming deadlier due to a combination of rising temperatures, increasing humidity and urban expansion. The research has also uncovered a worrying phenomenon: cities are not cooling down at night as much as they did during 2001-2010.
The study, Decoding the Urban Heat Stress among Indian cities, analysed data from six major cities – Delhi, Mumbai, Kolkata, Hyderabad, Chennai and Bengaluru — over a period of 23 years (January 2001- April 2024) found interestingly that while air temperatures haven’t risen significantly in some cities, increased humidity is worsening the heat stress people experience.
Heat stress results from a combination of air temperature, land surface temperature, and relative humidity, causing acute thermal discomfort and increased heat-related diseases in cities. Even if air temperatures vary, high relative humidity and land surface temperatures exacerbate discomfort.
I reached out to Anumita Roy Chowdhury, Executive Director, Research and Advocacy, Centre for Science and Environment, India and began by asking her why this was happening.
