Rice Prices Rise Globally After India Stops Export Of Non-Basmati Rice
India's ban on non-basmati rice exports is squeezing global markets with rice prices in Asia at the highest level in more than 3 years
Our Top Reports For Today
- <00:56> Markets Resume Their Run, Tech Mahindra Surprises, Why Buybacks Indeed? with Ambareesh Baliga
- <09:07> Rice prices rise globally after India stops export of non-basmati rice.
- <10:16> How falling wholesale price inflation is sharply bringing down prices of goods that we buy with DK Joshi
- <17:36> Upgrades and Downgrades of Company Performances, What is the final score? with Vinod Karki
- <25:41> And hmm..if you missed getting mangoes from Ratnagiri, you could get them from…Italy, yes Italian Mangoes!
TRANSCRIPT
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 Resume Their Run
After a pause and some minor anxiety here and there, thanks primarily to a 1,216-point fall over three days, the stock markets rose again yesterday in trade, having established of course that you cannot assume that things will keep going up all the time.
The S&P BSE Sensex touched a high at 66,897 and was up nearly 550 points at the high point of the day. However, losses in the Bajaj twins saw the BSE benchmark pare gains and eventually settle 351 points higher at 66,707. The Nifty 50 meanwhile closed up 98 points at 19,778.
Elsewhere, on Wall Street, the Dow Jones Industrial Average rose for the 11th straight session day on Monday to make it the longest winning streak since February 2017.
Interestingly, it is not the tech-heavy Nasdaq Composite that has led the market in the first half of the year but more non-tech stocks across energy, healthcare to banks.
Results season is in full swing as you know. IT services company Tech Mahindra's results were a bit of a surprise.
Tech Mahindra Q1 Results: Key Highlights (QoQ)
Revenue down 4.07% at Rs 13,159 crore (Estimate: Rs 13,579.2 crore).
Net profit declines 37.5% to Rs 703.6 crore (Estimate: Rs 1,146.9 crore).
"This is one of the toughest quarters I have seen," Chander Prakash Gurnani, chief executive officer at Tech Mahindra, said during a post-earnings virtual media interaction. "While the drop could have been anticipated, some of the macroeconomic headwinds and stretchy dealmaking have impacted our earnings."
Meanwhile, as you know L&T announced a Rs 10,000 crore buyback of shares on Tuesday. This also made it one of the largest buybacks, particularly by a non-IT company.
Incidentally, L&T's bet profits for the first quarter of the current financial year (Q1YFY24) rose around 46 percent to Rs 2,493 crore compared to the same period last year. Also, L&T was sitting on a reserves and surplus of over Rs 88,000 crore last financial year.
Now, the last major non-IT buyback was Reliance Industries which announced a buyback worth Rs 10,440 crore but that was a decade ago.
The big and IT ones are Tata Consultancy Services (TCS) topped the chart with Rs 18,000 crore of buyback, Infosys and Wipro occupied with buybacks of Rs 13,000 crore and Rs 12,000 crore, respectively.
Website Moneycontrol quoting prime database says TCS has bought back shares worth Rs 66,000 crore between 2017 and 2022, data sourced from primedatabase.com revealed.
So what explains a buyback from a manufacturing company like L&T which has authorised itself to buy up to 33 million shares for a maximum price of upto Rs 3,000 per share?
L&T by the way tried a buyback a few years ago too but its application was rejected by the regulator.
Also, how should investors in general view buybacks at a time like this, which obviously means that, among other things, companies are doing well and sitting on pots of money?
I reached out to veteran market analyst Ambereesh Baliga and began by asking him to define a buyback and why a company like L&T would go for it. And whether other companies would follow.
Rice Prices Skyrocket
Earlier in the week, we spoke to BV Krishna Rao, the president of the Rice Exporters Association, who told us he hoped that India would increase export duties on rice as we did with a 20% duty in September last year as opposed to banning it totally. That plea presumably is doing the rounds.
Meanwhile, India's ban on non-basmati rice exports is beginning to squeeze the global markets. Bloomberg is reporting that rice prices in Asia jumped to the highest level in more than 3 years. Thai white rice 5% broken, considered an Asian benchmark, was up to $572 a tonne, the highest in 3 years and up 7% in two weeks.
Meanwhile, Reuters is reporting that global rice importers are likely to seek direct deals with governments in exporting countries.
"The current ban excludes government-to-government sales, and it remains within the government's prerogative," Rao told Reuters.
Meanwhile, pressure from importers in the US catering to most likely panicked NRIs is likely to mount. More on that soon.
Falling Wholesale Inflation & Lower Prices, Better Corporate Performance
We usually talk of consumer price inflation or CPI because that is what usually affects us being linked to things we buy almost on a daily basis, including food items, vegetables and the like. And inflation or CPI is now rising and set to rise further, going by projections.
Wholesale price inflation on the other hand is falling. It is at -4.1% for June 2023 as compared to +4.8 for CPI or retail inflation for the same month.
What does this mean? It means that prices of commodities, metals and goods linked to these are coming down. Though these are things you may not be buying every day.
So we are talking about goods. Now goods in turn have a 34% weightage in the retail inflation basket, compared with around 39% for food and 27% for services.
In the last few days, when we have been talking of rising prices of cereals and pulses and vegetables, we have been talking about this 39% in the inflation basket as it is known.
If you look at the goods component in the retail or CPI inflation basket, it is now at 4.8% compared to 12.2% last year this time.
So, if wholesale inflation is down, what can we take away from it, for now and later?
Some interesting aspects, for companies and individual consumers like you and me.
To understand more, I reached out to DK Joshi, Chief Economist at rating agency Crisil who has just put together a report that looks at Falling CPI, Easing Goods CPI or the goods component of retail inflation and significant corporate margins, which of course links to some if not a fair part of the bull run we have seen.
I began by asking him to define WPI for us and the impact of its lower levels.
Upgrades and Downgrades of Company Performances, What is The Final Score?
We are at that stage in the market and economy where we are battling with mixed signals. Perhaps that is more often the case than not.
Broadly, companies are doing well, because input prices are falling as we just discussed.
The higher margins, earnings and profits which companies are reporting is what is giving many brokerages including all the big international names like Goldman Sachs that the stock market will have a lot of legs left as the second half of 2024 progresses.
On the other hand, obviously there are headwinds. The US and Eurozone are slowing down, export-oriented industries including software are feeling the pressure and will not be able to pull another rabbit out of the hat as they perhaps did in the latest quarter. At least not that easily.
What does the past tell us? ICICI Securities looked at an aggregate profit pool of 600 stocks and saw that the projected profit pool presently stands at Rs 12.75 trillion versus Rs 13.3 trillion a year ago. The 4% downgrade, ICICI Sec argues, is reasonable given the many crises that have hit world economies like the Russia-Ukraine War.
According to ICICI, a bulk of the earnings upgrades in the last year have been related to domestic cyclical demand, including financials, consumer discretionary, auto, tobacco and industrials, apart from internet stocks.
On the other side, the bulk of downgrades was driven by stocks related to defensive like IT, commodities, cement and healthcare.
Interestingly metals, Reliance, yes Reliance, telecom, healthcare and IT are responsible for bulk of the aggregate PAT downgrades while BFSI sector has driven bulk of the upgrade in FY24E earnings estimates over the past one year
So it's a mixed bag. But how mixed is it and what can we glean by looking at the data that companies are putting out and pretty much everyone is breaking their head over? I caught up with Vinod Karki, equity strategist at ICICI Securities, and began by asking him to define the methodology and approach to the upgrades and downgrades universe.
Mangoes from Italy
Climate change is driving up temperatures in many parts of the world as we can see right now.
Farmers in India are having a tough time coping with delayed monsoons, high intensity rains and heat waves. And their brethren across the world are also shifting crop patterns around trying to make the most of the changing climate.
The WSJ reports, in a detailed feature on the impact of climate change on farming, says that in southern Italy, farmers are growing tropical fruit such as mangoes.
The cultivation of fruits such as bananas, mangoes and avocados has increased threefold in Italy over the past five years and now covers some 1,200 hectares of farmland in Italy's southernmost regions of Sicily, Calabria and Puglia, the Wall Street Journal quotes experts.
In northern Italy, the warmer weather has apparently enabled the large-scale production of tomatoes and olive oil-crops that until 15 years ago were a preserve of the peninsula's central and southern regions.
"An increase in one or 1.5 degrees Celsius means we can now cultivate things such as wheat in northern Italy. But if the rise in temperature is followed by heavy rains and hailstorms with hails as big as tennis balls, that becomes a lot more complicated," an expert tells WSJ, adding, adapting to climate change isn't so simple."
That's it from me for today.
Have a great day ahead and do write in with your feedback or subscribe to us at www.thecore.in. It's free. Thank you once again for bringing us to the Top 100 among all podcasts in India.
