The Markets Are Flat Again and That’s A Good Sign
In the Indian stock markets the bulls and bears continue to tussle, barely managing to get the better of each other
On Episode 512 of The Core Report, financial journalist Govindraj Ethiraj talks to Probal Sen, Senior Analyst, Indian Oil & Gas Sector at ICICI securities.
(00:00) Stories of the Day
(01:00) The markets are flat again and that’s a good sign
(03:27) Fresh upside targets set as Trump uncertainties drive up gold prices again
(06:15) Making sense of Trump’s reciprocal tariffs on India, sectors hit and the hit
(08:47) India will import more LNG from the USA, what could that mean?
(21:13) Tesla is set to roll into India, on the back of unprecedented concessions
(23:07) Vietnam goes DOGE too, announces cut backs in Government
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Disclaimer (For Probal Sen Interview)
ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 17/02/2025 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months.
Good morning, it's Wednesday the 19th of February and this is Govind Raj Heti Raj headquartered in broadcasting and streaming as always from Mumbai, India's financial capital and the top themes and stories for today.
The stock markets were flat again and that's actually a good sign.
Fresh upside targets set for gold as Trump uncertainties kick in again.
India will import more liquefied natural gas or LNG from the United States. What could that mean?
And making sense of Trump's reciprocal tariffs in India, the sectors hit and the hit.
Vietnam Go's Doge 2 announces massive cutbacks in government in an aim to streamline bureaucracy.
And Tesla is set to roll into India on the back of unprecedented concessions.
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The Markets Are Flat
Well, the Indian Premier League or IPL matches kick off on the 21st of March next month and will run for close to two months well into a hot Indian summer. Meanwhile, the Indian stock markets continue to experience their version of it with the bulls and bears having a go and barely managing to get the better of each other.
The BSE Sensex swung again on Tuesday, was down, up and down and finally ended with a small loss of 29 points at 75,967. The NEC Nifty 50 was too swinging away before closing down just 14 points at 22,945. On balance, the markets were flat if you were to look at the positive side of things.
And it is positive because sustained selling seems to have slowed down for now. And the broader markets, the BSE Mid Cap Index also ended on a flat note. The overall market breadth was about negative at 3 to 1 in favour of the bears.
3,000 stocks declined at the BSE while 1,000 stocks gained. So focus on the 1,000, I guess. But overall pressure that's from foreign investor selling is still high.
There are various theories on why this is happening, including, of course, the fact that they are cashing in. But you have to note that the selling started at the end of September 24. It was almost like a switch that was turned off or on depending on how you see these things.
And that trend has continued into 2025 with foreign investors now having net sold about $12 billion of local stocks in 2025. A lot of funds are rotating back to China, as we reported the day before. And remember that there were some minor celebrations last year when it was the other way around, which is funds were going out of China and into India.
Thanks to Deep Seek, among other things, investors are now betting on Chinese technology prospects and AI prospects as well. Now, there is nothing on the horizon that can do that for India, at least that we know of. What India can offer is, of course, steady growth and market expansion by good companies for which some patients may be in order.
Elsewhere, the Indian rupee has been under severe pressure and is now once again seeing defensive buying and defence by the Central Bank or the Reserve Bank of India. It was weaker on Tuesday thanks to dollar demand spurred by the maturity of positions in the non-deliverable forwards or NDF markets and a decline in most regional peers, according to Reuters, which quoted traders saying that likely dollar selling intervention by the Reserve Bank helped limit losses. The rupee closed at Rs.
86.95 or just under Rs. 87, down slightly on Tuesday.
The Gold Stakes Are Rising
There is perhaps no better and consistent benchmark and indicator for everything that's wrong with President Donald Trump and the US administration's economic policies than the price of gold.
Continued uncertainty thanks to reckless policy pronouncements are keeping gold prices on the boil and have been so for a while. Not surprisingly, prices are now being revised upwards or other targets are being revised upwards once again. Goldman Sachs has raised its year-in-gold target to $3,100 an ounce on central bank buying and inflows into gold exchange-traded funds, according to Bloomberg.
Here is the figure that you should remember. Gold prices have risen about 45% in the last 12 months, which is more than the 18% in the gauge of global stocks, according to a Bloomberg calculation. So, 18% in stocks globally, 45% in gold.
Moreover, Goldman said that central bank demand may average about 50 tonnes a month, which is more than previously expected. Remember that we've been talking about how central banks, including countries like China, India, Turkey, among others, have been steadily increasing their gold purchases and their gold reserves. And guess what?
Goldman is now saying that if there is more uncertainty on economic policy, including on tariffs, then bullion could hit $3,300 an ounce, which is an annual gain of 26% on Bloomberg calculations. And if you were to believe that, you would be better off dumping everything and just buying gold. Now, it's not also clear to me how the markets, which were running up so much in anticipation of Trump's victory last year, did not anticipate this situation.
Gold has now been on a seven-week winning run. So, Goldman analysts said that we reiterate our go-for-gold trading recommendation, and they see significant hedging value in long gold positions because of a potential increase in trade tensions. I'm, of course, trying to think that could there be anything that could switch things around or move things around and bring trade tensions down?
There is nothing, unfortunately, on the horizon which suggests that. For example, if you were to look at India and the United States, a trade agreement between the two, as suggested, assuming there are no other further changes or shifts, is still six to seven months away. Bloomberg said that in Asia, the People's Bank of China has expanded its holdings for a third straight month in January.
That's of gold. Other official buyers have included Poland and India. Obviously, India would and should buy more gold since that appears to be the best hedge against all the uncertainty we are otherwise exposed to, and we seem not to be in a good position to do anything about it.
Bloomberg also said that Citigroup earlier in February said it expects prices to hit about $3,000 an ounce within three months, thanks, of course, to those geopolitical tensions and trade wars stoked by Trump. So, gold right now is at about $2,912 an ounce after hitting $2,942 an ounce last week. So, $3,000 in any case is not too far away.
The Citigroup's Take On Tariffs On The India-U.S. Equation
Back to reciprocal tariffs and the usual crystal ball gazing that every country at the mercy of Donald Trump's utterly unpredictable economic rants is forced to now do. An analysis by Citibank reported by Reuters says the most vulnerable sectors for India are chemicals, metal products, and jewellery, followed by automobiles, pharmaceuticals, and food products.
So, to break things down on where we stand, India exports about $74 billion worth of goods to the United States. This includes pearls, gems, and jewellery worth about $8.5 billion, pharmaceuticals worth about $8 billion, and petrochemicals worth about $4 billion. Pharma exporters, by the way, we've been speaking to feel that drugs are not likely to be hit with tariffs as such or definitely not as much as other categories given their sensitive nature and role in American drug supplies.
So, India's weighted average tariff stood at about 11% in 2023. That's about 8.2 percentage points higher than U.S. tariffs on Indian exports according to those Citi estimates. And if you were to look at the numbers from the other side, U.S. manufacturing exports to India were at about $42 billion and those obviously face much higher tariffs as we all know. They range from 7% on wood products and machinery to about 15 to 20% on footwear and transport equipment and nearly 68% on food items. Last week, the White House said in a fact sheet that the U.S. average applied most favoured nation tariff on farm goods was 5% compared to India's 39%. India has set a 100% tariff on U.S. motorcycles compared to a U.S. tariff of just 2.4% on Indian motorcycles. So, if the U.S. decides to impose reciprocal tariffs on several farm products, India's farm and food exports where tariff differentials are the highest but trade volumes low would be amongst the hardest hit according to that Citi study reported by Reuters. And in the worst case scenario of a uniform tariff hike of 10% on all goods and services imported by India from the United States, Indian economy could take a hit of 50 to 60 basis points according to standard chartered bank economists assuming a decline of 11 to 12% in imports as well. Now, India is already in anticipation cut tariff on several items for example to 30% on high-end motorcycles equals Harley Davidson motorcycles to about 50% on bourbon whisky from 150% while promising to review other tariffs and of course stepping up energy imports and buying more defence equipment including fighter jets.
India's Energy Mix And The Role Of Gas
Speaking of energy and energy imports, India's oil imports in the United States have already jumped in January from the previous month making the U.S. now the fifth largest oil supplier according to data obtained by Reuters. India is looking to import more from the United States as it targets to boost energy purchases from about 15 billion last year to 25 billion dollars and more on that shortly. Meanwhile, while India's imports from Russia which is now its top supplier rose about four and a half percent last month, it's likely to fall in coming months as there are heavy sanctions on Russian oil and the ships that ferry that oil.
How those sanctions and other relations with Russia will play out in the next few months is not very clear as the two that the United States and Russia are now meeting in Saudi Arabia to find a solution to the Russian-Ukrainian war without either Ukraine or Europe in the room so expect anything and everything. Meanwhile, the Reuters report also says that imports of Middle Eastern oil rose by about six and a half percent in January with Iraq continuing to be the second largest oil supplier to India followed by Saudi Arabia and the United Arab Emirates. Meanwhile, India and Qatar and more on that shortly have said that they are doubling their trade to 28 billion dollars in the next five years and are exploring the signing of a free trade agreement according to the Indian foreign ministry on Tuesday and this announcement came after talks between India's prime minister and Qatar's emir who is on a two-day visit to New Delhi.
So the overall share of Middle Eastern oil in India's crude imports in January stood at about a two-year high of about 53 percent while that of Russia remained almost stagnant from December according to that data originally from Reuters. Now India also stands to import more of it that's LNG or liquefied natural gas from the United States. India's energy mix is about six percent represented by gas but the government wants to take it up to 15 percent that's quite a mighty battle and journey ahead.
So where do we stand in our own journey in gas and gas consumption and how could imports of U.S. gas change that equation if so particularly since we may be forced to buy more from there. I reached out to Prabal Sen, oil and gas analyst and vice president equity research at ICICI securities and first asked him to define India's gas needs production and imports.
INTERVIEW TRANSCRIPT
Probal Sen: So India's overall gas consumption put in terms of MMSCMD which is essentially million standard cubic litres per day is somewhere in the range of 195 to 200 MMSCMD. Today it's actually neatly split between domestic and LNG in the sense that domestic production is at close to 95 to 98 MMSCMD and therefore even LNG is basically in the range of around 90 to 95 MMSCMD. Put in terms of million tonnes which is what you know sort of LNG gets traded in that translates to somewhere around 26 million tonnes or so.
Now if you put it in global context the global trade in LNG last year was close to 370 million tonnes. So we are still a relatively smaller player when it comes to our import requirements. Japan just to put things in context imports close to 78 million tonnes on an annualised basis.
China would be somewhere in that range around 50 to 60 million tonnes. But having said that India's demand is growing at a fairly fast clip. I think most estimates indicate that you know Indian gas consumption will probably grow by 8 to 10 percent a year pretty much over the next decade or so and considering the fact that there is simply not enough domestic production to make up for that supply your requirements for LNG will keep growing at the rate of around 2 to 3 million tonnes pretty much every year.
So that gets you in the range of somewhere around 35-37 million tonnes in a very short period of time.
Govindraj Ethiraj: So which means of 26 that you said roughly 13 is domestically produced?
Probal Sen: No no 26 million tonnes is the LNG that we import today. Domestic production converted to million tonnes is also around 25 million tonnes. In MMSCMD terms both of these numbers are about 95 MMSCMD or so.
And in million tonnes? In million tonnes it's about 25 million tonnes which is what India imports today in LNG.
Govindraj Ethiraj: And total India's LNG consumption just to go over that figure again?
Probal Sen: So India's overall gas consumption including domestic and LNG put in million metric standard cubic metres per day is about 195 MMSCMD. Of this around 95 odd MMSCMD is produced domestically by the likes of ONGC, Reliance and you know Oil India and so on. The balance part whatever is imported all of it is imported in LNG form because India doesn't have any importing gas pipelines.
Similar to let's say what Europe had with Russia before the conflict. India doesn't import anything through the pipeline route. All of its imports are through LNG which translates again to about 95 MMSCMD converted to million tonnes.
This number translates to about 25 to 26 million tonnes as on date.
Govindraj Ethiraj: Right and we have to import it in the form of LNG because you need specialised tankers and that's how it comes in. Yes, yes. Okay so that part's clear now.
So now Trump administration has just lifted a ban on exports of LNG. In our trade talks America is telling India that you need to buy more energy from us. Presumably a good part of that would be LNG.
So what is this adding up to?
Probal Sen: I think it's important to put the Trump decision in context. What the Biden administration had done I think last to last year if I'm not mistaken was to put a lot of new project approvals on hold. Now there are still a significant amount of projects that are already in development that have not come on stream as yet.
That itself is a very very significant number. Today if you look at it the amount of liquefaction capacity globally is about 478 million tonnes or so of which US alone accounts for almost 90 million tonnes. Now if you look at the projects that are already approved even during the Biden administration that had been approved earlier and are already in development that number alone is close to 78 to 79 million tonnes.
So the US anyways had a fairly clear and a robust pipeline of export projects that was there for the next three to five years. What the Trump decision actually does is to clear the pipeline for basically the period starting CY 27, 28 and beyond. Because what they had done by blocking export approvals for new projects that would have meant that final investment decisions or FIDs as they are called which would have happened over 24, 25 and 26.
Those would have been held up which is what the Trump administration has thankfully removed. So therefore from a slightly longer term perspective as well there were about 150 to 200 million tonnes of projects that are basically in the approval or to be approved stage. A large part of that may actually see the light of day under this administration if they have their way over the next four years.
And I think that means that in terms of sources of supply the US can actually continue to become even bigger. They are already the biggest LNG exporter today globally. They have surpassed Qatar and Australia and I think that lead will only grow more significantly over the next decade or so.
So from an Indian standpoint to answer your second question, one of the articles that I read recently stated that given the kind of tit-for-tat tariffs that are slated to be imposed, India will probably need to cool the heat down by importing an equivalent amount of energy since the US is a large destination for some of our refined product exports and other exports. And therefore to bridge that deficit the secretary was quoted as saying that you know we would look to increase our energy imports by as much as 10 billion dollars. We import about 15 billion of energy imports already.
About 10 billion dollars more is sought to be imported. Now if I were to translate that in terms of volumes, 5 million tonnes of LNG at a 10 dollar price roughly would translate to about 2.5 to 2.7 billion dollars and about 0.2 to 0.3 million barrels of oil per day would translate to another five and a half billion. So I honestly don't know what combination India is looking at but I guess given our requirements as I just stated I think that would probably be the direction they would take in terms of redressing this trade balance that the US is also aiming for.
Govindraj Ethiraj: Right and LNG particularly is a little unusual because most contracts are long-term. We've just signed another one with Qatar from whom we were importing substantial amounts. So we are at about six percent of energy consumption in gas and wanting to of course go to 15.
How do you think this gap could be addressed or will we have a shift or break contracts or how could that work?
Probal Sen: No Anu, I think as I said the kind of requirements that we have within this 25 million tonnes that I mentioned earlier in terms of what we today consume in the form of LNG there is a fair proportion of gas which we import on spot basis which is to say that we import it from the short-term Asian markets. You know in the region I think if I look at the term contracts that are in place you know you would have probably three to four million tonnes already that would be imported on short-term basis. So given that this demand will continue to increase as I said over the next five to seven years if we have another seven eight million tonnes of effective demand we can obviously look to tie up import contracts with a whole lot of destination.
It could be three to four million from the US, another two to three million from Qatar as is being sought. You could even have fresh contracts from Mozambique as and when it starts up. Given that India has a big ownership of one of the large projects there if and when that project starts up you could have some projects tied up from there.
See India as an energy market is never a market of this or this. You know India as a market is essentially I will take this and this and this. So to that extent whatever source we can actually target and tie up gas from yes there could be a mismatch here and there for a short period of time but I don't think that tying up more cargoes from the US is necessarily a threat to other long-term contracts that we are targeting from the Middle East.
Govindraj Ethiraj: Got it and again this is for someone who's trying to understand so if gas is coming from the US versus Qatar obviously it's travelling a longer distance does that affect prices or is that entirely market determined at that point of time?
Probal Sen: Let me just give you an example of what the prices are today. Even today we have contracts from Qatar and we have contracts from the US. Yale already has about 5.8 million tonnes coming through which is benchmarked to US Henry Hub prices whereas Qatar's contracts are tied to Brent prices or an Indian basket of crude and a certain percentage is attached to that. If I were to compare the prices today even today at $75 crude the price of long-term cargoes from Qatar is somewhere in the range of around nine and a half dollars or so. You know at a very rough estimate and similarly on a Henry Hub base price of three and a half dollars the contract that was with tied up first with Chenier which was essentially 115 percent of your base Henry Hub price plus about three dollars of margins and then you add on freight insurance and transport that translates to about nine for two dollars as well. So it really depends on what kind of pricing formula is really agreed to with whatever contracts we're signing otherwise you know I think US cargoes thanks to the huge differential of their basic Henry Hub price versus you know LNG prices in Asia they end up being fairly competitive to any cargo that is available.
Govindraj Ethiraj: As a buyer to us whether it's coming all the way from the US or from next door in Qatar or Australia on the other side is really not I mean it's really market determined the price I mean not the distance or anything like that.
Probal Sen: Absolutely it's about what you can negotiate in terms of the benchmark and the pricing formula because this is never a fixed price contract. LNG contracts are almost always based on a percentage of a certain benchmark and that benchmark itself as you rightly mentioned is a function of the market you know if you have a Brent linked benchmark you have no clue what Brent is going to do but all you can do is basically try and see if the percentage to Brent is not excessive and similar would be the case for a benchmark which is linked to let's say US Henry Hub prices which is a function of what US domestic markets are doing how their gas production is doing and so on and so forth.
Govindraj Ethiraj: Got it. Probal, thank you so much for joining me.
Probal Sen: Thanks for having me. Pleasure.
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And that was Probal Sen also in reference to this interview do have a look at the disclaimer we have included in the description in the notes
Tesla Is Back
In the last year India has been pining for Tesla moving heaven earth and of course policy to bring the car and its founder to India nothing seems to have worked at that time and now the gates have been thrown open again or maybe they were always open following a meeting between India's Prime Minister and Elon Musk in attendance with his children and their nannies in New York and therefore you should get set to see those cars on Indian roads very soon. So to facilitate all of that Tesla has already posted for hiring in India and it's seeking candidates for 13 roles according to Bloomberg including customer facing and back-end jobs. At least five of those positions including service technicians and various advisory roles were in Mumbai and Delhi while the rest of the openings such as customer engagement and delivery operations were for Mumbai so that gives you a sense that there is an operation that's being set up essentially to sell cars that are imported in full form.
Tesla has demanded in the past that India reduce customs duties on cars and essentially offer direct entry while India has traditionally made global car makers set up shop in India and manufacture here but Tesla is Tesla and India has quite evidently bent backward and forward even at the cost of upsetting other global car companies who have been spending or investing billions in India's domestic market. India has also reduced basic customer duty on cars priced above $40,000 from 110% to 70% earlier this month and that has obviously been a preemptive move to the United States who of course has been threatening and will impose reciprocal tariffs in some form or the other.
Globally Tesla's EV sales are dropping and while India is a useful long-term market which will of course welcome the brand for badge value if nothing else there is nothing in the Indian market that can offer Tesla any real respite in near term since what will come here will be more of a higher end car with limited appeal and of course in the looks of it very limited distribution and servicing capability as well.
Vietnam Is Downsizing
There is an interesting trend in government downsizing while the United States has gone after it with an axe and a machine gun other countries are also promising to reduce and implement government role or the reduction of government role in various walks of life. China's Xi Jinping said on Monday that they would improve ease of doing business remember that term for its entrepreneurs and now Vietnam's parliament has formally approved a plan for the biggest government overall in decades a move that will slash thousands of jobs and radically streamline a bloated bureaucracy in an effort to pursue ambitious growth targets reported Bloomberg. The vote was passed on Tuesday at an extraordinary meeting of the National Assembly in Hanoi an estimated 100,000 civil servants would be affected as the government targets a 20% reduction in the size of ministries government agencies and workforce in the biggest restructuring since Vietnam adopted pro-market reforms in the 80s according to Bloomberg.
Several ministries are being abolished while others are being merged interestingly many state-run TV channels are also being shut down and multiple newspapers and magazines scrapped. Now there is obviously a lot of internal politics in all of this but the larger import of this is obviously a drive to demonstrate a drive for efficiency. A range of payouts are being offered to thousands of those government workers and many apparently are worried about finding new jobs.
India by the way has also and shunned some ministries or departments within them but nowhere near what was expected with the current government which came into power in 2014 which has also not really moved on selling big stakes in or privatising state-owned enterprises apart from the notable example that was Air India.
