Peace Returns To Dalal Street
While the Indian markets seem to be recovering from their jitteriness, a quick reminder that world markets are still strong, close to record highs, ahead of US inflation data, among other factors
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) Peace returns to Dalal Street, for now
- (03:41) Wholesale inflation is at a 13 month high
- (05:04) Forget diamonds, it's all about copper now - how rising demand is triggering massive shifts in the mining industry.
- (06:56) In India’s pharmaceutical industry, there are no friends and there are no enemies either
- (18:01) Ford is now losing $100,000 per electric car
- (19:27) How China’s international air traffic is still 70% of pre-pandemic levels
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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Peace Returns To Dalal Street
Four phases of elections of a total of seven in India’s general elections have ended. There are three more to go but it's safe to say that the trends are quite clear, at least to those who are vested in the outcomes since results of several privately commissioned large or small exit polls must be in.
Perhaps that is the reason the BJP, widely expected to win the elections with a strong majority, is no longer displaying the jitters that it did in earlier weeks.
And the present approach seems to have swung almost to the other direction with the Home Minister and the Minister of External Affairs of the country themselves talking up the stock market.
Talking up the stock market in itself is not the best thing to do because markets usually do best and consistently when they are not actively talked up by politicians and rise up steadily precisely as they have been in recent years.
The Government to its credit has largely refrained from talking to and up the market.
Back to the present, stock markets rose for a third day on Tuesday thanks to auto, banks and metal shares. More on metal shortly. The BSE Sensex closed 328 points higher at 73,105 levels, while the Nifty50 ended at 22,218, up 114 points.
The broader markets were strong with the BSE MidCap adding 1.14 per cent, and the BSE SmallCap rose 1.8 per cent.
Reuters said volatility in Indian markets, which rose for 13 straight sessions on concerns over election results and sustained foreign selling, eased on the day, but was still near 19-month high levels hit in the previous session.
While the Indian markets seem to be recovering from their jitteriness, a quick reminder that world markets are still strong, close to record highs, ahead of US inflation data, among other factors.
The benchmark 10-year U.S. Treasury yield was last at 4.479%, flat on the day, down from mid-April's five-month high of 4.739%, but still sharply up from the 3.899% at which it started the year.
Reuters reported a survey released on Monday by the New York Fed showing Americans seeing inflation a year from now at 3.3%, higher than they did a month earlier.
Among some company news, the new thrust on energy and sustainability and similar moves among peers likely triggered the German owned Siemens in India to demerge its energy business into a separate legal and listed entity – Siemens Energy India Limited.
Siemens Limited will continue to be a technology-focused company in industry, infrastructure and mobility while Siemens Energy India Limited will focus on being an energy technology company supporting its customers in transitioning to a more sustainable world, the company said.
Wholesale Inflation Rises
India's wholesale price-based inflation as measured by the wholesale price index or WPI rose sharply to a 13 month high in April to 1.26%, thanks mainly to food and primary articles.
The April figures were higher than the 1% rise expected by economists polled by Reuters and up from a 0.53% year-on-year rise in March.
WPI-based inflation remained in positive territory for the sixth consecutive month, after having been in the deflationary zone for the majority of the previous financial year.
Yes, do note that it was deflationary for most of the last year.
The data released by the Ministry of Commerce and Industry on Tuesday showed that the uptick in factory gate inflation during April was driven primarily by the spike in the prices of food articles and fuel, among other things.
CARE Ratings economists told Business Standard although the outlook for food inflation has brightened due to anticipations of a normal monsoon, which is expected to bolster agricultural production, monitoring the monsoon's temporal and spatial distribution remains critical.
It's All About Copper
Copper is hot. Not only are prices high and new uses for it are kicking up demand but the increased demand, present and perceived, is leading to major shifts among the global mining giants and trading companies.
The WSJ reports that after a top copper producer recently hit a financial crunch, the Biden administration started huddling with potential investors about taking a stake in the company’s Zambian mines worth as much as $3 billion.
And then there are other countries also lining up, including the United Arab Emirates, Japan and Saudi Arabia—all viewed as friendly to U.S. interests —expressing interest in the stake in First Quantum Minerals’ assets.
The larger goal here, says the WSJ, is to keep it out of Chinese control. Or else, I imagine, another critical mineral will be China dominated.
Meanwhile, BHP Group’s record nearly $43 billion takeover bid for Anglo American, which was rejected Monday, also puts, as we have been discussing on The Core Report, a fresh spotlight on the brown metal.
Meanwhile, while London-listed Anglo produces a range of commodities, from diamonds to nickel, Australia’s BHP has made clear that it most prizes the company’s copper assets.
Nevertheless, Anglo American will exit diamond, platinum and coal mining in a massive restructuring designed to fend off that $43 billion takeover approach from rival BHP Group and turn the miner into a copper giant.
So copper again.
So you might be surprised to hear about what Anglo is giving up.
Anglo said it plans to demerge or sell its De Beers diamond business, separate its Anglo American Platinum Ltd. unit and sell its coking coal mines in Australia.
It will also slow spending on a giant fertiliser mine in England.
So back to copper and iron of course.
How In India’s Pharma Industry, There Are No Enemies And Friends Either
There are more than 1,000 active Pharma Sales and Marketing players in India.
Though 35 players contribute to almost 80% of this industry. Smaller players focus on niche therapies, specialities or geographies to make it big and then try to spread at a pan India level.
The interesting thing is the pharma market is constantly buzzing with activity where major pharma companies seem to be constantly on the hunt for products and brands to either buy or distribute with manufacturing.
This is not new but has surely picked up pace in recent years and maybe months, says a new report from Pharmarack Technologies, a pharma industry research firm, authored by vice president Sheetal Sapale.
One reason for brands getting shopped around is because many multinational companies like Novartis have steadily reduced their exposure in recent years in the Indian market and switched to marketing alliances with domestic majors.
But more than that, there is a realignment in the market between who will produce and sell versus those who will perhaps create and then quickly start looking for larger organisations to partner, distribute and thus grow faster.
In the context of a growing pharmaceutical market like India, this is interesting because we don’t see something like this - active asset management for lack of any other term - in any other industry.
Some quick examples.
Take a company like Torrent which acquired Elder Pharma in 2013 for Rs 2,000 crore. Since then it has been acquiring, co-marketing or hosting brands from Novartis, MSD, Unichem and Glenmark.
Note that the alliances are all of kinds, in border and cross border.
Similarly Dr Reddy’s may have done a dozen significant deals in the last decade, including partnering with brands like Pfizer, Boehringer Ingelheim among others. It also bought Wockhards 62 brands and a plant a few years ago. Apart from licensing let's say Remde Sivir - remember - from Gilead and working with Novartis and distributing Sanofi vaccines in India.
Sun Pharma which merged a decade ago with Ranbaxy similarly has distribution with AstraZeneca, Zydus and Bayer among others.
Like I said, there is a push and a pull.
Cipla for instance works with Boehringer Ingelheim, Roche, Sanofi and Eli Lilly.
I do use the term works loosely here because the relationships are specific and can differ from product to product and company to company.
I spoke with Sheetal Sapale at PharmaRack and began by asking her what was driving this trend of partnerships.
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More Trouble With EV Makers
Ford Motor Co. has begun cutting orders from battery suppliers to stem growing electric-vehicle losses, Bloomberg reported adding Ford is throttling back ambitions in a rapidly decelerating market for plug-in models.
As EV prices have plunged and demand has slackened, Ford’s losses per EV exceeded $100,000 in the first quarter, more than double the deficit from last year, Bloomberg said.
The move is part a retrenchment of Ford’s EV strategy, which includes reducing spending by $12 billion on battery-powered models, delaying new EVs, cutting prices, and postponing and shrinking planned battery plants.
Ford has forecast EV losses of up to $5.5 billion this year and Chief Executive Officer Jim Farley recently said its EV unit, Model e, “is the main drag on the whole company right now.”
Bloomberg Intelligence has estimated the losses Ford expects to sustain in its EV unit this year will come close to wiping out the profits it earns from its Ford Blue division, which makes traditional internal combustion engine vehicles like the Bronco SUV and gas-electric hybrids such as the Maverick truck.
Automakers in the US are seeing EV demand slide even as battery makers in South Korea, China and elsewhere are dealing with a backlog of unsold inventory.
And this in turn is impacting prices for key metals like lithium, cobalt and nickel, which have all traded at multi year lows this year, stalling investment decisions on new projects and, in some cases, leading to mine closures.
Good news or bad news, you decide.
China’s Low Air Traffic
Qantas Airways said on Tuesday it will suspend flights to Shanghai starting on July 28, citing low demand, nine months after it resumed post pandemic service from Sydney, Reuters reported.
The interesting number is this.
International flight numbers to and from China are about 70% of pre-pandemic levels and have been slower to recover than in other markets because of fewer tourists and a domestic economic slowdown.
So while this is a Qantas move, obviously many other airlines are also affected.
China's aviation regulator has said it expects international flights to return to 80% of pre-COVID levels by the end of 2024.
