The Markets Rise For Third Session
Benchmark equity indices, the BSE Sensex and NSE Nifty50, extended gains for the third consecutive day to settle in the green on Tuesday
On Episode 449 of The Core Report, financial journalist Govindraj Ethiraj talks to Sanjeev Jain, Chief Operating Officer at Wipro as well as Ajay Sharma, Managing Director (Valuations) at Colliers International.
(00:00) Stories of the Day
(01:09) The markets rise for third session, stabilising upwards now
(02:45) The rupee falls again as RBI seemingly lets go
(05:06) How Wipro is training its top brass in AI and using it for more organisational efficiencies
(13:32) Air cargo volumes are up last month, stay high as trade signals but Trump trade tariffs could hurt
(15:09) AT&T stock is being fancied, for its boring fibre business
(19:19) Is the premium end of the real estate market bottoming out?
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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Good morning, it's Wednesday, the 4th of December and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai, India’s financial capital.
No take for today but lots of conversations, from real estate to AI so stay tuned and here are the top themes and stories
The markets rose for the third session, stabilising upwards now.
The rupee falls again as RBI seemingly lets go.
Is the premium end of the real estate market bottoming out ?
How Wipro is training its top brass in AI and using it for more organisational efficiencies.
Air cargo volumes are up last month, stay high as trade signals but Trump trade tariffs could hurt.
AT&T stock is being fancied, for its boring fibre business.
Stock Markets Hold Up
Benchmark equity indices, the BSE Sensex and NSE Nifty50, extended gains for the third consecutive day to settle in the green on Tuesday.
The 30-share Sensex was up 597.67 points, or 0.74 per cent, to settle at 80,845.75 while the NSE Nifty50 was up 181.10 points to close at 24,457.15.
So the interesting thing is that the Nifty 50 is around 7% below its all-time high levels hit in late September, as opposed to the roughly 10% a few weeks ago.
So the question is whether the recovery from the correction has begun and to what extent.
It does appear that FIIs are not selling as aggressively now, or even buying steadily, at least going by the macro numbers.
There is a sense that the Government will nudge for some monetary policy action or lower interest rates and also boost capital expenditure which has been slowing.
And the supply of domestic funds continues unabated.
The fear index, India VIX, which measures volatility in the markets, ended down 2.22 per cent at 14.37 points.
Among the broader markets, the Nifty Midcap100 and Nifty Smallcap100 indices settled with gains of 0.89 per cent and 0.84 per cent, respectively.
Rupee Down
The rupee hit a fresh all-time low on Tuesday weighed down by a broadly stronger dollar and a slump in the offshore Chinese yuan to a one-year low.
On the other hand, persistently strong dollar bids in the non-deliverable forwards market also exerted pressure, Reuters reported.
The rupee touched a low of 84.7575 before closing slightly nearly flat on the day at 84.6850.
The rupee recovered slightly from its record low as dollar demand ebbed towards the close of the session and the yuan also trimmed losses, a trader at a state-run bank said.
Earlier in the session the rupee managed to avoid deeper losses largely on the back of the Reserve Bank of India's intervention in the spot and onshore forwards market.
While outflows have slowed down, at least in contrast to October, there are concerns on slowing economic growth and weakness in other Asian currencies like the Chinese yuan.
Lower growth rates could trigger the Reserve Bank of India to lower interest rates but whether that will happen is up in the air as the central bank is focused, among other things, on attacking inflation and within that food inflation through high interest rates.
How that quite works is not clear to me though.
The larger point, as emerged from an Axis Bank report yesterday, was if the RBI was intervening less in the markets and letting the rupee depreciate.
Or transfer the risk to businesses and corporates as the Axis Bank report argued should be done.
Whether the report preceded the action or followed the action is not clear to me but there seems to be some knowledge or prior knowledge of what was going on or going to happen.
"After many years of stability (and enjoying carry trade inflows) it looks like the Reserve Bank of India has set the rupee free," analysts at ING Bank said in a note.
The rupee's near-tenor volatility expectations have risen with the 1-month implied volatility touching a near six-month peak of 3% on Tuesday.
The dollar index was last quoted slightly lower at 106.2 after rising 0.5% on Monday, while Asian currencies were trading mixed, said Reuters.
How Wipro is Using AI
There has been much discussion about how companies are gearing up to use Artificial intelligence in their operations.
When it comes to IT service companies, there are two components, first how engineers adapt to AI so they can better serve their customers who are looking to apply AI in their own business environments and second of course within these IT companies.
Wipro is a good example with some 240,000 employees with the twin challenges and objectives of applying AI.
As part of a special series called hosted with industry body Nasscom, I spoke with Sanjeev Jain, COO of IT services major Wipro and began by asking him what are the learnings from the internal roll out of AI ?
INTERVIEW TRANSCRIPT
Sanjeev Jain: First of all, when we announced last year, we announced with an intent and took a leap of faith. Now in hindsight, a year and a half down, I'm very happy that we took that leap of faith. And let me give you where we are today.
Out of the 240,000 employees that we have in Wipro globally, 230,000 have already completed what we call Gen AI 101. And what 101 does is creates an awareness to every employee on not only AI, but we believe that the responsible usage of AI is a very important component of AI. So we have all gone through it, including our senior management, including some of our board members.
That is one. Second is having done the 230,000 Gen AI 101, we started launching advanced learning pathways. It's natural curiosity for human being.
Our employees started asking after 101, where is my 201, 301, 401. So we now have about 44,000 of our employees who are in advanced AI certified category. That has been a significant achievement for us.
And as we went through it, you will understand going that it's not one size fit all. You have to get into persona-based certifications. When I say persona-based, if you are in sales, if you are in a healthcare industry, if you are in financial services.
So we created almost 40 plus persona-based learning pathways. So that we have folks on domain knowledge and the relevant AI infusion in that. To do this, how did we go about it?
Step one, we created an AI academy. We need an AI academy internally to withdraw, who actually could curate the content, launch this learning pathways, and then get this training cascaded to all our employees. It has been on an e-learning module.
We also partnered with a lot of our hyperscaler partners. We have strong partnerships with Microsoft, Google, IBM, Amazon, Nvidia. So we actually worked as an ecosystem, leveraged each other's learning modules, and that helped us bring it to life.
In addition, what we have done, and this is all learning, as we go around, we learn every time. So a lot of our employees also wanted to do much more deeper learning and certifications. So we have tied up with the Indian Institute of Science, Bangalore.
That's a very unique program where actually we have an online master's in AI and data science. So that means Wipro employees will be assessed by IISC. There is no dilution of standards.
They will go to the same aptitude, the same knowledge assessment that they would do for any other candidate they take. Then Wipro will enable a flexible work-integrated learning program with IISC over a period of two to three years, where our employees will graduate. The undergraduates will enroll and graduate as masters.
So I think to me, these are multiple things we have done. I would say we are still learning, what more to do.
Govindraj Ethiraj: Right. That's very interesting. So let me pick up on two or three points.
So first is, you said that responsible AI was one of your key thrusts of this whole program. The second you said is that you worked with both young people, I mean, young engineers, as well as very senior colleagues, as well as even board members. So how was the learning thrust towards them?
As in, were the same things being taught to all people? And how are they receiving some of these inputs or lessons?
Sanjeev Jain: Excellent question. So initially, I would say that the younger, the Gen Z employees were able to finish faster. Some of people like me possibly needed some gamification, right, to understand a little bit more better.
So I think we then started gamifying a bit, we started introducing quiz in between to increase our learning ability and started using some examples or use cases that actually brings things to life. I think that's the journey we went along. And now I think it is kind of a module which is well understood by a layman.
And if they want advanced paths, they can choose to go, you know, further deeper through our AI academy programs that we have.
Govindraj Ethiraj: And I'm going to come to the specific programs as well. But when you, you know, AI has been, you know, it launched in some ways two years ago, and it's been in the way we are seeing it through chat, GPT, and so on. Of course, AI existed much before that.
The manifestation is what we're seeing. So this is also, I'm guessing in some ways, a moving target. So how does a program like this keep pace?
Sanjeev Jain: Yeah, so absolutely, it's a moving target. But let me tell you, my own understanding or hypothesis of AI, it's, it's not a new thing, as you also rightly said, to me, AI always existed, our ancestors used, we did not call it AI, but they did our horoscopes, I'm sure you would have your horoscope as well. So they did horoscope based on the solar system patterns.
Okay, then, as we grew up, we use calculators, right? As I went into engineering, I started using scientific calculators. Okay, as I went to us, I started using GPS to navigate in the cars there.
Okay, so I think the point I'm making is some sort of AI was always there. What has changed now is the availability of data and compute infrastructure. I think the data has multiplied the compute infrastructure has become affordable.
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I also asked Sanjeev Jain about what were the use cases within Wipro and to walk us through how they were applying AI within their own organisation and processes.
INTERVIEW TRANSCRIPT
Sanjeev Jain: Now coming to me, I come back to Wipro as a client zero because for us that is in our control, right?
So I, we have many live cases today. So for example, if I want my pay slip today on the system, I just, I have a chat bot. I just say pay slip for this month.
It just mails it to me. If I want to process my leave, I have a chat bot who does it. Earlier I would have had to go somewhere, log in, download, or send an email to someone.
So there are many use cases wherever expense processing, right? All the travel reports, expenses, all our lease processing, all our queries with HR, queries with IT help desk. I think have actually gone live.
We are actually seeing real benefits of these cases in production today. So it is real here and now. That's very important because people have to feel the power of AI going live.
It's not just a theory anymore. And once they know, I think they are getting more advanced now into, you know, getting structured data and unstructured data together. For example, let me tell you, we have now embarked on a talent marketplace, having such a large company, 240,000, you can imagine.
We want to make sure we are in my mind, overriding our talent marketplace. What do I mean by overriding our talent marketplace? There are a set of jobs, demands that come and there are our employees.
So I have to marry both, right? So I, what we have done is we have asked each one of our employees to update their profiles. Once you update your profile, you can be matched to the next job that you want and you can define your career aspiration.
You could say that Govind is here today, Govind wants to be there tomorrow. And the AI engine will actually match based on your current profile and current skills, the desired skills. It will give you a learning path.
And then you follow the learning path and you apply for the job. And then once you're selected, you can move. So these are to be examples, people are seeing that it's helping them in their career aspirations.
It's helping them drive them to a learning path, which they would have been blindsided. Even today, our kids ask after 10th, what to do after 12th, what to do after engineering, what to do. So we're trying to fix that gap to actually help people define their career ambition and enable them through various programs that we have to meet their career aspirations.
Air Cargo Demand Up for 15th Month. The Trump Factor
The International Air Transport Association (IATA) has released data for October 2024 global air cargo markets which shows that total demand, measured in cargo tonne-kilometers (CTKs*), rose by 9.8% compared to October 2023 levels (10.3% for international operations) for a 15th consecutive month of growth.
Capacity, measured in available cargo tonne-kilometers (ACTKs), increased by 5.9% compared to October 2023 (7.2% for international operations).
This was largely driven by an 8.5% increase in international belly capacity. This refers to the storage within passenger aircraft.
Dedicated freighter capacity increased by 5.6%, the seventh consecutive month of growth with volumes nearing 2021 peak levels.
While 2024 is shaping up to be a banner year for air cargo, we must look to 2025 with some caution. The incoming Trump Administration’s announced intention to impose significant tariffs on its top trading partners—Canada, China and Mexico—has the potential to upend global supply chains and undermine consumer confidence. The air cargo industry’s proven adaptability to rapidly evolving geopolitical and economic situations is likely to be tested as the Trump agenda unfolds," said Willie Walsh, IATA’s Director General.
AT&T Fancied
The story that follows from the WSJ has an interesting poser for India and Indian businesses as well.
Reliance via its telecom brand Jio has invested heavily in media and entertainment, from TV18 to Disney through acquisitions and joint ventures.
But how much of the real value lies actually in its hard assets under ground in the form of its vast fibre, wireless and cable networks ?
I am inclined to believe the value lies below rather than above, in a manner of speaking. Yes I know wireless is in the air !
And this is why I thought so.
The Wall Street Journal reports that shares of telecommunications giant AT&T have rebounded—including a 35% gain so far this year—since Chief Executive Officer John Stankey reversed course and spun off its Warner Bros.
unit and unloaded satellite company DirecTV.
The future for AT&T now is powered by its wireless and broadband services as it works to wind down its legacy landlines.
AT&T, based out of Dallas while No. 3 player in the chase for the U.S. wireless customers, holds a commanding position in the red-hot battle for fiber-optic broadband subscribers.
The company said Tuesday it expects to return more than $40 billion to shareholders over the next three years through stock buybacks and its existing dividend payouts.
The company staked out an additional $10 billion over that span to give it flexibility to make acquisitions, pay down debt or spend on other initiatives.
Such plans were out of the question in 2022 when Stankey slashed the annual dividend and sold the WarnerMedia unit to Discovery Communications.
AT&T spent the following two years cutting jobs and booking big write-downs, WSJ reports.
The interesting bit is this.
Broadband companies are generally enjoying a Wall Street rebound as investors give the sector a fresh look.
And falling interest rates are driving yield-hungry investors toward traditionally dependable telecom stocks backed by tens of millions of monthly cellphone bills.
Stankey took over the telecom giant in 2020. The new CEO worked to unwind many of the big acquisitions he had a hand in striking, including the $49 billion purchase of DirecTV. The company eventually wrote down more than $20 billion of its pay-TV business, which it has gradually sold off to other owners.
Will India follow suit at some point ?
I don’t know but this is something to think about because from a sheer importance point of view, I would give more weightage to the network including speed and reliability rather than the content at this point, assuming of course the content is largely fungible and can come from anywhere.
Intel CEO
Intel Corp. Chief Executive Officer Pat Gelsinger was forced out after the board lost confidence in his plans to turn around the iconic chipmaker, adding to turmoil at one of the pioneers of the technology industry, Bloomberg has reported.
The clash came to a head last week when Gelsinger met with the board about the company’s progress on winning back market share and narrowing the gap with Nvidia Corp., according to people familiar with the matter.
He was given the option to retire or be removed, and chose to announce the end of his career at Intel, said the people, who asked not to be identified because the proceedings weren’t made public.
Intel Chief Financial Officer David Zinsner and Executive Vice President Michelle Johnston Holthaus are serving as interim co-CEOs while the board searches for Gelsinger’s replacement, the company said in a statement.
Gelsinger, 63, was once hailed as a savior of the chip giant.
He took over three years ago and had first began working at Intel when he was a teenager but left in 2009 and became CEO of VMware Inc.
Upon returning in 2021, he promised to regain the chipmaker’s lead in manufacturing — something it had lost to rivals like Taiwan Semiconductor Manufacturing Co.
Gelsinger set out to take Intel beyond its traditional strength in personal computer and server processors by expanding into making chips for other companies — something it had never done before and putting it into direct competition with TSMC and Samsung Electronics Co.
As part of his revival strategy, Gelsinger laid out a costly plan to expand Intel’s factory network. That included building a massive new complex in Ohio, a project for which the company received federal aid from the Chips and Science Act.
Is Premium Real Estate bottoming out?
A Reuters report and poll put out a few days ago and we referred to yesterday as well said that home prices in India - broadly referring to housing in major cities - were expected to rise 7.0 per cent this year.
The larger question was the sheer force of premium segment purchases in the housing segment, including for high priced apartments in cities like Delhi, Mumbai and Bangalore.
It does seem that there could be some plateauing at the premium end, which of course does not bode well for the entire real estate market.
I spoke with Ajay Sharma, managing director of Valuation Services at Colliers International and began by asking him how he was seeing the trends at the top right now, what was changing and why ?
INTERVIEW TRANSCRIPT
Ajay Sharma: One of the key reasons why I gave that opinion on the Reuters poll as one of the contributors was that we actually are seeing flattening out of the demand universe for residential real estate, right? So this is primarily because the fact that the luxury sales that we're talking about are kind of flattening out across cities. Now, most of the articles that you see in the daily newspapers and online media pertain to what's happening the previous quarter.
Even if you go by that, in Q3, everybody has said the sales have dropped by over 11% across in India, okay, on a quarter-on-quarter basis, which means that there is some kind of stabilisation happening on the demand side. The most important factor is that in the last two years, what actually drove the price growth and the volumes has been largely the luxury real estate and the premium real estate across cities. So it's very clear from any residential sentiment index reports that you take from any of the research agencies that you will see that's been the case.
I mean, even in terms of pure supply, the new launches that have happened in the last 24 months also, the premium and the luxury segments have dominated across. Classic example, Delhi, NCR, Mumbai metropolitan region, Bangalore. You're basically seeing that this segment has actually dominated the sales and launches.
The only outlier being is say a Kolkata or Ahmedabad, where they don't historically have such a massive premium projects. And therefore, the overall ticket size has been more rational when you compare it with these other larger cities. So that's the only thing.
One of the most important aspects that many people forgetting is that the segment that was buying into the luxury and the premium housing, there will be a point where they have maxed out their consumption and that maxing out of consumption is happening. And when that happens, you will be left with a lot of residential volume, which will be in the segment where everybody was riding on for the last two years. And that will become a problem.
So this is kind of happening as a cycle. Honestly, if you see in a pre-2019 also, if you see in the early 2010s, right from 2010 to 2014, you would have seen a massive raise in the luxury and the premium segments. And then subsequently affordable kind of became the buzzword in the residential segment, which segment took over.
And then it continued at a point where residential sales were absolutely flat in 2018 and 2019. People were discussing, okay, it's much better to probably do a commercial project or a retail project or any other non-residential asset class per se. So that was how they were all perceiving.
And then comes this entire pandemic and its impact on the 18 months and subsequently the pent-up demand flowing out. Honestly, as people who have been tracking this market, at least I felt that the pent-up demand would only last for 12 months. But I also believe what has happened is because a lot of government incentives were in place, like reduction of stamp duty, helping out with certain kinds of concessions for the buyers, the whole home loan rate itself being low, all these things kind of contributed to the demand and that pushed significantly the sales.
And the people who took the most advantage of this were people in the cream segment, because there was never going to be a better time where people could save on stamp duty, people could save on a lot of concessions, etc. And the people who are sitting on the wall, who could push themselves to afford a higher cost unit, but were not doing it because of the economics. Now, because of these concessions, we're seeing that it was much easier to be on the other end of the spectrum and they started buying into that spectrum.
So that's why premium and luxury performed very well. Since the beginning of 2022 to today, you have actually seen the home loan rates going up, which means that price to EMI ratio is actually up. So all those things are going up, which means that a certain segment will anyway fall off the demand curve, which was the people who were sitting on the wall, right?
So those people who are looking at a 1.5 CR kind of houses, who are now pushing themselves to buy a 2, 2.5 CR kind of houses, now that entire segment will fall back into their original price bracket. You have that demand segment anyway coming out. So you have a reduction in the demand volume already happening.
And the people who were actually buying into this 5, 6, 10 crores kind of apartments, they have maxed out their consumption anyway. Because ultimately investment, it is all about making money, right? Today you buy it, then you flip it and then you make money. Whether it is a person who is earning 10 lakhs per annum or a person who is making 100 crores per annum, doesn't matter. Everybody wants to grow their capital. So it would be a fallacy to think that people who have bought all these units are going to just sit on the units because they have an attachment to it.
No, they bought it because it's an economic investment. They have to flip it at some point of time. So once that flip starts happening, what will happen is you will see a flood of the secondary market opening up in the luxury segment. And obviously, because people have bought it at a certain price, they are okay with certain margins, they will just offload it. And then we are seeing the new launches which are coming in with a very high price. Just like a classy example, Delhi NCR, 32% year-on-year increase in terms of pricing.
It's been crazy. For the first time, I think in Delhi NCR history, we are seeing units selling about 100 crores in the super luxury segment. So these are the kind of things which are an indicator to where the overall trend is moving.
And that's why we believe that the thing is bottoming out.
Govindraj Ethiraj: Right. Thank you so much for joining me.
Ajay Sharma: Thank you. Thanks.
