Sensex Crosses 81000
The stock markets shot up suddenly in the second half of the trading day on Thursday and took the benchmarks - BSE Sensex and NSE Nifty - to record high levels
On Episode 342 of The Core Report, financial journalist Govindraj Ethiraj talks to Vinay Kumar G, vice president and sector head – Corporate Ratings at ICRA.
Our Top Reports For Today
SHOW NOTES
(00:00) The Take
(04:00) Stories Of The Day
(04:41) Sensex Crosses 81,000, markets at record highs for fourth day, bucking global trends
(06:25) Infosys beats street estimates
(08:45) Rice inventories are at record highs and the Government could open up exports
(09:47) Is Indian aviation infrastructure ready for the big demand growth?
(18:05) Are the days of revenge travel ending?
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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Good morning, it's Friday, the 19th of July and this is Govindraj Ethiraj broadcasting and streaming from and headquartered in Mumbai.
The Take
The Karnataka Government has pulled back or put on hold for now a job reservation bill for Kannadigas or those who belong to Karnataka.
The bill was cleared by the state cabinet on Tuesday.
The bill stipulated some 50% reservation for locals in managerial roles and 70% in non managerial positions, all in private companies.
Industry was not consulted about this or informed as was evident from the swift backlash.
Karnataka is obviously not the first state to come up with this idea.
Before Karnataka, it was Haryana in 2020, Andhra Pradesh in 2019 and Jharkhand in 2023 that tried to implement reservations for locals in private jobs. All three states provided for the quotas with salary caps. All proposals are languishing in the courts and the government.
There are of course several problems with these proposals.
First is the nature of such a bill which obviously acts as a deterrent to investment because any organisation if told who to hire and in what context in a competitive market will walk out or not invest at all.
Second is the manner it seemed to have been pushed through with little or no discussion, including with industry who if alerted to such an intention would surely have been prepared for it, rather than being shocked out of its wits.
The no discussion part of course quite frequently in policy making across the board nowadays but we are talking of Karnataka today.
Third is of course the fine print. Who is a local, is it someone domiciled or someone who speaks the language ?
The TOI reports that there have been demands for a local quota for Kannadigas in private sector jobs going back to the Sarojini Mahishi report's proposals in the early 1980s.
Several iterations of it have been tabled by govts since, including the previous BJP govt, but did not go anywhere.
The current proposal by the state labour department is titled "Karnataka State Employment of Local Industries Factories Establishment Act Bill, 2024".
While it drops the term "Kannadiga", a local has been defined as one who had been domiciled in the state for 15 years and meets certain criteria of knowing Kannada language.
Now the larger problem.
There is a jobs problem in India, regardless of what the highly massaged data put out by some quarters in Government are telling you. And you can see it when tens of thousands of people land up to apply for a few 100 jobs, public or private sector.
If there is one signal that went out in the recent elections, at least in my understanding, it was that there is a problem of jobs and aspirations.
Of course, Governments have oversold promises of jobs and prosperity and perhaps that is coming back to bite everyone.
But the fact is that India’s population and aspirations are growing and there are not enough jobs to meet them.
The politicians are reading the signals exactly as they are being transmitted.
You may question their response but you can’t question their judgement.
There is no magic bullet for India’s jobs problem. The problem is only if the promises are too grand or the inequality too stark.
I remember a lecture I attended where the speaker spoke of how two cars driving alongside in parallel lanes were moving slowly.
The next lane then starts moving faster. The driver in the slow moving lane does not worry because she thinks her lane will eventually catch up.
That’s what keeps most people expectant, that there is economic progress, even if there is no immediate trickle down it will happen at some point.
People may not riot in the streets if that does not happen but that surely means that they will not vote you back into power, particularly if your lane never catches up with the one next to you.
The jobs problem needs far greater nuance and focus in addressing and cannot be resolved by quick commentaries such as this. We can only highlight that this is the problem and people should focus here rather than in releasing reports which suggest that all is well.
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Sensex Crosses 81000, Markets Hit Records For Fourth Day In A Row
The stock markets shot up suddenly in the second half of the trading day on Thursday and took the benchmarks -- BSE Sensex and NSE Nifty -- to record high levels.
The markets were subdued to lower in the morning owing to weak global cues, essentially tech stocks coming under pressure on Wall Street, mostly on concerns of over valuation, a concept that seems a little alien in Indian markets right now.
The Sensex index jumped over the 81,000-mark for the first time and the Nifty50 crossed 24,800 in the intraday trade.
The 30-stock Sensex index ended at 81,343, up 627 points while the Nifty50, ended at 24,801, up 188 points or 0.76 per cent, after hitting a lifetime peak of 24,838.
IT stocks did well and we will come to Infosys results in a moment.
Interestingly, or perhaps not, the broader BSE MidCap and SmallCap indices fell 0.99 per cent and 1.15 per cent respectively.
The rupee fell on Thursday, almost breaching its record low, on corporate outflows and oil companies' dollar bids, Reuters reported.
The rupee settled at 83.6500 against the U.S. dollar, down from its close at 83.5825 in the previous session. It had hit its all-time low of 83.6650 on June 20.
The currency weakened despite broad declines in the greenback and U.S. bond yields. The dollar index was up slightly on Thursday after declining to a four-month low of 103.6 in the previous session.
Infosys Beats Estimates
IT Services major Infosys net profit rose 7.1 percent on-year to Rs 6,368 crore, beating Street estimates.
India’s second-largest IT company’s consolidated revenue from operations for the April-June quarter rose 3.6 percent on-year to Rs 39,315 crore, according to the stock exchange filing, reported by MoneyControl.
Infosys further surprised analysts by raising its revenue growth guidance for the financial year 2024-25 on July 18, with the metric being raised in the range of 3 percent to 4 percent.
Analysts had anticipated Infosys to maintain its FY25 revenue growth guidance at 1-3 percent in constant currency (CC) terms.
However, on a quarter-on-quarter basis, the IT company’s bottomline fell 20.1 percent, mainly due to a tax refund boost in the preceding quarter.
The company revised its annual revenue growth guidance five times in the previous five quarters.
The latest was in the March quarter when it slashed guidance to 1-3 percent as weakness continued in discretionary and digital projects. In January, it lowered the full-year guidance to 1.5-2 percent for FY25.
Business Standard quoted Infosys CEO saying there were three reasons that support our guidance. First is a strong Q1, which was because of strong volume and good financial services outcome in the US. And third a very strong large deal and in tech acquisition, which got closed in time.”
Infosys saw its headcount come down for the sixth consecutive quarter by around 2,000 though the company said it would add around 15K to 20K freshers this financial year. Attrition rate moderated to 12.7 per cent from 12.6 percent in the previous quarter, indicating a downward trend observed across the sector.
Asian Paints
Shares of Asian Paints fell as much as 4.5% in early trade on Thursday, a day after the country’s largest paint company reported its steepest quarterly profit slide in three years, hurt by weak demand and price cuts.
Reuters said inflation-weary customers were switching to cheaper options forcing Asian Paints to cut prices, though marginally.
Asian Paints has been alerting a slowdown in consumption though and has said revenue slipped in the last quarter on "tough" demand conditions amid heat waves and India's national elections.
Rice Exports
In commodity news, the Government may cut the floor price for basmati rice exports and replace the 20 per cent export tax on parboiled rice with a fixed duty on overseas shipments, government sources told Reuters.
The reason. Rice inventories in India have hit a record high.
India, also the world's largest rice exporter imposed various curbs on exports in 2023 and continued them in 2024.
Now, the expectation is that basmati rice's minimum export price (MEP) will be lowered to $800-$850 a metric ton, down from $950 a ton, to boost shipments, said the sources, who didn't wish to be identified as they are not authorised to talk to media.
Lowering the MEP would help India retain its market share against Pakistan, which exported a record amount of rice this year due to New Delhi's export curbs.
India Aviation Is Soaring
Indian aviation experienced its highest half-year traffic on record this year, with close to 80 million passengers from January to June, compared to 76 million passengers during the same period last year, according to data by the Directorate General of Civil Aviation (DGCA), compiled by Business Standard
These figures are 12.3 per cent higher than those of 2019, the last full year before the Covid-19 pandemic.
Interestingly, the data suggests India is among the few countries that quickly rebounded and surpassed pre-pandemic numbers last year and of course continues to grow.
Although June saw a decline in passengers compared to May, it was the best June on record for domestic air traffic in India, with 13.6 million passengers compared to 12.4 million in June 2023.
There is of course a capacity problem in India too. Over a 100 aircraft are grounded in India, including from airlines like GoFirst which have stopped flying last year and other airlines like Indigo facing engine parts problems.
The number of operational aircraft in India is far below the 800 registered with commercial airlines.
So fares are high and load factors are strong, all in all good for the airline business, though most of the profits are right now with Indigo.
The four Tata airlines, Air India, AirAsia India (now AIX Connect), and Vistara have a market share of 28.7 percent while IndiGo market share is around 60 per cent, and has since stabilised around this figure
I reached out to Vinay Kumar G, VP & sector head – corporate ratings, ICRA who looks at the aviation sector and began by asking him of the overall capacity versus supply trends he was seeing and how that might play out in coming months.
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Is Revenge Travel Over?
Speaking of aviation and travel, Bloomberg is reporting that airlines in Europe are now feeling a cold chill wafting over the Atlantic from their US counterparts.
Of course this is peak summer in the western hemisphere when everything is usually bursting at its seams.
On Wednesday, United Airlines Holdings Inc. became the latest carrier to avoid weakening profitability, joining the likes of Alaska Airlines Group Inc. and Delta Air Lines.
The interesting thing is that airlines are warning of falling ticket prices amid a fare war that’s weighing on their profit, hurting carriers during a time of the year that normally marks an industry peak.
Of course the problem also seems to be that airlines have hiked their fares so much that there is resistance now setting in, particularly in some key markets.
Or, revenge travel is now giving way to regular travel.
Last week, Deutsche Lufthansa AG cut its profit outlook for the full year and warned that breaking even at its namesake German unit will be challenging. Qatar Airways has cautioned that higher capacity in the market is putting pressure on fares.
Bloomberg says this is a reversal from the post-pandemic rush, when ticket prices soared as people splurged on holidays after two years of home confinement, in what was dubbed “revenge travel.”
But one key factor seems to be corporate travel, which typically balances out deal-seeking holidaymakers, also hasn’t rebounded properly post-pandemic, adding more uncertainty to the airlines’ outlooks.
