Stock Markets Go On A Fresh Roller Coaster Ride
Markets struggled to make sense of more election-linked signalling including a statement from India's Home Minister Amit Shah on Monday asking to buy before June 4 because the markets would rise on that day
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) Stock markets go on a fresh roller coaster ride, set for a smoother ride for a few days.
- (02:59) Inflation levels are steady but vegetable inflation is not.
- (04:30) Emerging markets are looking good again after almost a decade and why India will benefit.
- (17:19) Car sales hit records in the last financial year, could this trend continue this year too?
- (25:45) India & Iran sign deal to manage terminal at Iranian port.
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 Go
It was a roller coaster ride in the stock markets on Monday, otherwise a slow news day as most Mondays are. Of course this is relative.
Markets struggled to make sense of more election-linked signalling including a statement from India’s Home Minister Amit Shah during the day on Monday asking, presumably investors, to buy before June 4 because the markets would rise on that day.
June 4 as you are aware is the day votes will be counted from India’s 2024 general elections and results will be declared. Mr Shah’s day job is the country’s internal security.
That the markets will zoom on counting day is of course contrary to what the markets are expecting, including those who firmly believe that the BJP will return to power with a convincing majority.
Be that as it all may, the markets did shoot up on Monday after cracking almost 800 points during the day.
It closed at 72,776, up 112 points or 0.15 per cent. Similarly, the NSE Nifty50 index shut shop at 22,104, up 49 points or 0.22 per cent after hitting a low of 21,821.
The Nifty 50 has lost about 3% in the six sessions since hitting a record high on May 3.
Tata Motors was down 8% in the biggest single-day drop since February 2022 on lower margins for its Jaguar Land Rover business and competition from hybrid cars eating into both its internal combustion engine or petrol and diesel cars as well as popular electric cars. More on cars and how they are doing later in the show.
The Nifty volatility index was higher for the 13th straight session. The "fear gauge" as it is called added 213 basis points on Monday to 20.6, the highest since October 2022.
And Mumbai saw a dust storm accompanied by heavy winds and rains which also saw damage in some areas including a hoarding that toppled over trapping people beneath in central Mumbai.
Retail Inflation Is Down, Vegetables Are Not
India's retail inflation eased marginally to hit 11-month low of 4.83 per cent on an annual basis in April as against 4.85 per cent in the previous month, the government data showed on Monday.
A Reuters poll of 44 economists had estimated the number to come down to 4.80 per cent.
The problem as we have been discussing here on The Core Report is vegetable inflation which stood at close to 28% year on year, similar to the month of March.
Inflation rate for cereals and pulses, which constitutes a significant portion of India's staple diet, came in at 8.63 percent and 16.84 percent respectively. Cereals include rice and wheat and pulses include the dals which are evidently running at 17% inflation levels or close to it.
Some other data points like fuel and light inflation were down, and so were categories like housing and clothing and footwear.
Bank of Baroda Research put out a note saying heat wave effects have just about been seen in vegetable inflation at 28% and will get exacerbated in May too.
Cereal and pulses will continue to witness high prices until the next crop comes in and any changes in the downward direction will be more due to base effects rather than prices coming down as stock levels come down in the market.
Emerging Markets Are Picking Up After A Long Pause
Domestic investments are strong but foreign portfolio investment is important too, for the trigger effect it has and a likely counterbalance if domestics start selling at any point of time.
The interesting thing is that emerging markets are picking up.
A research report from ASK Private Wealth in Mumbai says that after a somewhat prolonged period of under-performance, things seem quite well-positioned for a break-out in Emerging Market (EM)
Equities.
The report, authored by Dipankar Mitra, Director, Research and Somnath Mukherjee, CIO & Senior Managing Partner, ASK Private Wealth says that over longer periods of time, EM has been at par, and often outperformed the US/Developed Markets.
The real underperformance is really from 2010 onwards, when EMs have drastically underperformed.
The key reason for this underperformance, says ASK Wealth, is earnings growth which has lagged the United States.
The other reason is a strong dollar and usually EMs perform well when the USD is weak and vice versa.
Which of course makes the current rise interesting and I will come to that.
ASK says Companies growing earnings by at least 10% a year or more represent more than half the index in EM. And a higher
proportion of the EM index weight is in companies with more than 30% EPS growth, when compared with the US market.
Right now, as we discussed yesterday, FIIs are selling, having sold almost Rs 17,000 crore in May already, compared to March and April when they were net buyers.
But this is not a trend indicator by any stretch. But if EMs are looking good now and things settle down after election results are out, there could be stronger and steadier flows. I spoke with Somnath Mukherjee of ASK Wealth and began by asking him how we were projecting non domestic or foreign flows.
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India’s Car Sales Are Strong But Waiting Periods Are Down
Car sales for the last financial year were strong and the trend is continuing into this year as well, data from India’s car dealers is suggesting. Last year, sales stood at around 3.9 million cars, around 8.5% higher than the previous year.
Interestingly, sales are rising because more vehicles are available which means all manufacturers have either increased capacity, which they have or are producing more because supply chain bottlenecks have been resolved.
The net result is that waiting times are down in dealerships and except for a few models, most are available off the shelf.
There are two models which still have waiting periods, and we will come to that but the wait times are no longer what they were a year ago as well.
And of course, SUVs now represent a market share of 50 per cent of all passenger vehicles sold in India.
I reached out to Manish Raj SInghania, President of the Federation of Automotive Dealers Associations and I began by asking him how he was seeing the trends for 2024-25 or the current year continue in the context of the highlights of the last financial year.
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Meanwhile, sticking to cars, President Joe Biden will quadruple tariffs on Chinese electric vehicles and sharply increase levies for other key industries this week, Bloomberg has reported.
The total tariff on Chinese EVs will rise to 102.5% from 27.5%.
The number of actual cars affected may not be much and the US is also working on cracking down on connected cars, including obviously from China so there are several efforts at play here.
Bloomberg says Biden’s plan for more tariffs is mostly symbolic as China doesn’t rely on US consumers for the targeted sectors.
Chinese EVs were virtually locked out of the US market years ago by existing tariffs, while solar firms mostly export to the US from overseas, avoiding similar curbs.
India And Iran Sign Deal For Port Terminal
Meanwhile, in another shift in the increasingly intricate geopolitical equations of our time and in the region, India and Iran on Monday signed a long-term contract for the operation of the Shahid Beheshti Port terminal at Chabahar in Iran.
The contract was signed by India Ports Global Ltd and Ports and Maritime Organisation of Iran in the presence of Ports, Shipping and Waterways Minister Sarbananda Sonowal, according to a series of posts on X by the Indian Embassy in Iran, Business Standard reported.
This is the first time India will take over the management of an overseas port.
The minister said Chabahar is not only the closest Iranian port to India but it is also an excellent port from a nautical point of view.
India has been pushing for the Chabahar port project to boost regional trade, especially for its connectivity to Afghanistan.
The Ministry of External Affairs (MEA) had allocated Rs 100 crore for Chabahar Port for 2024-25, underlining India's focus on connectivity projects with Iran.
Iran and Israel as you are aware were firing missiles at each other a few weeks ago and tensions in the middle east are obviously at levels not seen in many years.
India and Israel also have close ties, both politically and in business.
