Stock Markets Crack, Lose Max In Single Session In 9 Months
The run on Dalal Street paused on Wednesday, as the Sensex and Nifty clocked the biggest losses in a single session in over nine months after scaling record highs in early trade
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) Stock markets crack, lose max in single session in 9 months.
- (3:45) Hundreds of ships are now diverting around Africa to avoid Red Sea, as costs and logistics come into focus.
- (12:18) Onion prices are bringing tears to countries in Asia after India’s ban on exports
- (16:21) Covid19 cases are slowly rising, understanding the threat
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 Take Another Pause
If you were expecting the markets to keep running away, a reminder, they usually don’t.
As veterans always tell me, a market taking frequent pauses, breathers and breaks is better than one going up too high, too soon.
Anyway, the run on Dalal Street paused on Wednesday, as the Sensex and Nifty clocked the biggest losses in a single session in over nine months after scaling record highs in early trade.
The Nifty 50 slumped more than 400 points or 1.4% and settled down 3013 points at 21,150. Earlier, it hit an all-time high level of 21,593 points.
The Sensex plunged by over 1,400 points from its lifetime high of 71,913 to end down 931 points at 70,506
All the 30 Sensex stocks, and 46 of 50 Nifty stocks settled in the negative zone.
The broader markets, too, clocked their biggest one-day loss since October 2023 with the BSE MidCap and SmallCap indices falling 3.3 per cent and 3.4 per cent, respectively.
So the question of course is why?
Several reasons are being proffered including of course the tensions in the Red Sea which is now seriously threatening global trade and movement of crude.
Though it's more likely that the markets need to take deep breaths at any summit, as they are right now.
Elsewhere, the rupee ended flat at 83.18 against the US dollar amid the selling in equities and concerns over oil supplies through the Red Sea route.
Speaking about the rupee, an interesting battle of words has erupted between the International Monetary Fund which reclassified India’s de facto exchange rate regime from “floating" to “stabilised arrangement" for the period from December 2022 to October 2023 after a recent review of the country’s policies.
The assessment, published in a country report on 19 December, was contested by India which via its executive director at the IMF said that the “characterisation of India’s exchange rate as a ‘stabilised arrangement’ is incorrect and inconsistent with reality".
So what’s with the reaction?
Well, if a country is said to be following a stabilised arrangement, it would mean that it is manipulating its exchange rate, not something that sounds very positive I reckon.
The RBI intervenes quite visibly to prevent sharp movements, as is evident from the way the rupee has been holding against the dollar in recent months or more.
The larger trajectory for the rupee is weak going by forex experts The Core has been speaking with. So let's see where we land in the coming days.
And Red Sea Tensions
The United States is putting together a task force to stop Houthi militants in Yemen from attacking commercial vessels.
Buy shipping companies are waiting for details, and worry about implementation.
The Houthis are attacking ships to show support for Hamas in its war against Israel, and some in the region worry that too forceful a response will only escalate the violence.
Shipping lines have begun sending vessels around the Cape of Good Hope or the southern tip of Africa as opposed to going through the shorter Red Sea and into the Suez Canal route.
This adds at least 7-9 days to the journey time as shipping experts have told us.
Bloomberg is quoting logistics giant Kuehne+Nagel saying 103 container vessels are rerouting from the Red Sea around Africa. Oil prices already have edged higher in response to the rising uncertainty, with Brent a shade over $80 a barrel.
The Red Sea carries about 14% of global maritime trade. More than 20% of containers passing through the Suez Canal carry goods from Asia to European and Mediterranean nations, according to logistics intelligence firm project44, quoted by Bloomberg.
The next round of concerns obviously centre around what this increased shipping cost and delays will do to prices of products going from east to west.
The cost to send a 40-foot container from Shanghai to Rotterdam has jumped 44% from the end of October before the attacks began, and by more than 26% to Genoa, they remain well below levels in 2021 and 2022 during the pandemic, data compiled by Bloomberg shows.
As exports who spoke to The Core said, the ships have to sail the long routes as they have to take goods to their destinations and thus the additional cost cannot be wished away or negotiated with, in the manner of speaking.
The only option as of now is for ships to join convoys with military protection, not a desirable option at least logistically.
“It will slow down the trade because we will have to wait for a convoy to pass through” the region, Euronav NV Chief Executive Officer Alexander Saverys said in an interview with Bloomberg TV.
The oil tanker giant has halted all shipments via the Red Sea and won’t go back until such military escorts are in place.
The Pentagon hasn’t yet detailed how the so-called Operation Prosperity Guardian will protect ships. Vincent Clerc, the chief executive of container shipping giant A.P. Moller-Maersk A/S, reckons it will take a few weeks for the task force to become operational.
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Stand By, American Oil Is Here
And now, our energy segment is supported by IndiaEnergyWeek.
So we have been referring off and on to rising US production of oil or shale oil.
The background is that shale had been somewhat forgotten about, at least as a threat to major OPEC countries in the supply stakes.
Remember, OPEC countries have been fiddling with supplies and cutting back some and threatening to cut back more to keep prices high.
While the red sea tensions have caused a blip for now, US shale in general has kept the OPEC countries and the oil markets stable to soft.
Bloomberg is reporting that drillers in America have ramped up oil production well beyond what analysts foresaw, pushing output to a record just as OPEC and its allies have been trying to reduce output.
This time last year, US government forecasters predicted domestic production would average 12.5 million barrels a day during the current quarter.
In recent days, that estimate was bumped to 13.3 million; the difference is equivalent to adding a new Venezuela to global supplies.
“The US clearly played a huge role in the global market in 2023, including pressuring OPEC+ to curtail their output,” Wood Mackenzie Ltd. analyst Ryan Duman said during an interview.
The interesting story about shale is that drillers are now squeezing out more oil and drilling faster than ever before, helped by new technologies and innovations. So productivity is up though the number of wells are down.
So, the bottomline is that when it comes to energy, surprises can be sprung from old and new quarters.
With the result that oil prices will not necessarily shoot up in a hurry, the red sea tensions notwithstanding.
The energy segment was supported by IndiaEnergyWeek, to take place on February 6. Details on www.indiaenergyweek.com
Tears In Eyes Of Asian Nations
Elsewhere, a story of goods which are not leaving their port of origin.
India's ban on the export of onions has driven up prices of the vegetable for Asian buyers, who are scrambling for cheaper alternatives, Reuters is reporting.
India will mostly not ease up on the export ban until after general elections in April-May next year. India sends almost half of all imports of onions by Asian countries
India banned exports of onions on Dec. 8 after domestic prices more than doubled in three months.
Reuters says shoppers from Kathmandu to Colombo are struggling with high prices, since traditional Asian buyers, such as Bangladesh, Malaysia and Nepal, and even the United Arab Emirates, rely on imports from India to bridge domestic gaps.
India exported a record 2.5 million metric tons of onions in the financial year that ended on March 31, with 671,125 tons going to neighbouring Bangladesh, its biggest buyer of the vegetable.
To overcome the shortage, Bangladesh is trying to source more from China, Egypt and Turkey, said commerce ministry official Tapan Kanti Ghosh. Bangladesh prices have gone up 50% after the ban earlier this month, officials told Reuters.
Like in rice, Nepal has been affected by onion availability.
Of coure back home, onion prices have eased and exporters would prefer India returned to the export market.
India has banned exports of rice, sugar, wheat and onions now.
The Big Roads Project
The Ministry of Road Transport and Highways has pitched an extensive program aimed at constructing and expanding approximately 41,000 km of national highways, including 15,000 km of high-speed, access-controlled corridors, by the fiscal year 2031-32. All this is estimated at Rs 19.5 lakh crore, according to a report in the Times of India.
Under the proposed master plan for highway development, the initial phase projects are scheduled for bidding by 2028-29, with completion anticipated by 2031-32.
Once finalised, this initiative is poised to nearly double the average travel speed on the National Highway (NH) network from the existing 47 kph to an impressive 85 kmph.
A comparison reveals that the current average travel speed on highways in the US exceeds 100 kmph, while in China, it stands at 90 kmph.
The government envisions that this significant increase in speed will contribute to achieving the goal of reducing logistics costs to 9-10 percent of the GDP, down from the current 18 per cent.
Presently, only 3,900 kilometres of high-speed corridors are operational in the country, and projections indicate that by 2026-27, this figure will rise to approximately 11,000 kilometres.
That is the good news of course, but it brings me to an important point.
India has the worst road death rate in the world.
Last year, some 168,000 people died on Indian roads, which was an increase over the previous year and the pre-Covid figure thanks to some 461,000 accidents.
This gives India the distinction of having the highest number of road-crash deaths in the world. It also translates into 19 deaths and 53 accidents per hour.
This is a gruesome figure indeed.
Remember, accident numbers are not necessarily proportional to number of vehicles but accidents often involve buses crashing into some stationary or moving object or just falling off into a gorge, often in the middle of the night.
India needs roads and the best ones at that.
We also need drivers to learn how to drive, particularly on highways.
We also need trauma support infrastructure so injured people can reach hospitals quickly in the golden hour as they call it.
But that will never be enough if we don’t teach ourselves to drive safely and be mindful of others lives, if not ours.
Covid 19 Cases Rise
Covid-19 cases are rising across India, with 614 new coronavirus infections in the past 24 hours, the Indian Express is reporting.
As per the latest Union Health Ministry data updated on Wednesday morning, Wednesday, India now has 2,311 active cases. Three new deaths have been reported from Kerala,
India’s health minister has directed states to monitor emerging strains. This is the highest number of new cases detected since May 21. Twenty cases of the 20 JN.1 sub-variant have been detected in Goa, Kerala and Maharashtra.
This is obviously a new strain of an old virus, if one can call it old.
I reached out to infectious diseases expert and AIDS Society of India president Dr Ishwar Gilada and began by asking him what was different in the current strain of Covid19?
