World Markets Hit Highs Again
World markets highs were led by Japan's Nikkei 225 which closed above the 40,000 mark on Monday to set a new record high. Earlier, the S&P500 and the Nasdaq Composite hit fresh all-time highs on Friday
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) World markets hit highs again, India joins the party with smaller steps.
- (03:26) Moody’s catches up, ups India GDP projections
- (05:35) India ships crude from big find in Krishna Godavari basin.
- (06:50) 26 years after launching its first car, Tata Motors to demerge passenger cars from parent commercial vehicles.
- (11:23) RBI cracks down again, this time on IIFL’s gold loans business.
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 Highs Everywhere
Markets everywhere are on a high again.
First, at home, Indian shares moved up, albeit modestly as was somewhat expected.
But the small rises still took the indices to a third straight session of record highs.
The blue-chip NSE Nifty 50 hit a new record high of 22,440.90, before settling at 22,405.60. The BSE Sensex rose 0.09% to 73,872.29.
Indian indices are still being powered by the surprise GDP numbers last Thursday evening which showed that at 8.4% the economy grew at its fastest pace in six quarters.
And world markets highs were led by Japan’s Nikkei 225 which closed above the 40,000 mark on Monday to set a new record high. Earlier, the S&P500 and the Nasdaq Composite hit fresh all-time highs on Friday.
The Nikkei’s rise is historic as we have pointed out earlier, having crossed its 1989 or 35 year high.
Tech stocks are leading the way in Japan, somewhat similar to the United States where AI and companies like NVidia are powering the rally at a scale not seen before.
But overall, Japan’s companies are reporting strong profits and now attracting more and more funds switching away from China.
Even Warren Buffer has betted on Japan’s trading houses.
There are other interesting takeaways from Japan also suggesting how companies are responding to increased flows.
Bloomberg reports that companies are being encouraged by the Tokyo Stock Exchange to publish reports on their plans to boost equity valuations.
Some have announced share buybacks and dividend hikes. Management buyouts are on the rise and activist investors are also stepping up their campaigns.
Oil Steadies, India Starts Shipping From New Wells
Oil prices are now near their highest levels this year after OPEC extended production cuts to the end of the next quarter.
Brent crude was quoting just under $84 a barrel even as the Organization of the Petroleum Exporting Countries and its allies extended a roughly 2 million-barrel-a-day reduction through the end of June, with Russia pledging added emphasis on cuts to production rather than exports, Bloomberg reported.
More oil linked news in a bit.
Moody’s Raises India’s Growth Forecast
With India posting higher GDP and growth numbers, rating agencies have had little choice but to follow.
Global rating agency Moody's on Monday raised India's growth forecast for 2024 calendar year to 6.8 per cent, from 6.1 per cent estimated earlier, on the back of 'stronger-than-expected' economic data of 2023 and fading global economic headwinds.
India's real GDP expanded 8.4 per cent year-over-year in the fourth quarter of calendar year 2023, resulting in a 7.7 per cent growth for full-year 2023.
Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023, Moody's Investors Service said in a report in Business Standard.
Significantly, Moodys said global headwinds were fading which should help the Indian economy comfortably register 6-7 per cent real GDP growth, it added.
"India's economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8 per cent from 6.1 per cent. India is likely to remain the fastest growing among G-20 economies over our forecast horizon," Moody's said in its Global Macroeconomic Outlook for 2024.
For 2025, the GDP growth is estimated at 6.4 per cent.
"Robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth suggest urban consumption demand remains resilient. On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum," Moody's said.
"We expect policy continuity after the general election and continued focus on infrastructure development," Moody's said.
The agency said while private industrial capital spending has been slow to pick up, it is expected to pick up with ongoing supply chain diversification benefits and investors' response to the government's Production Linked Incentive scheme to boost key targeted manufacturing industries.
India Ships Crude from Krishna-Godavari Basin
The Prime Minister Narendra Modi on Saturday flagged off the first tanker - Swarna Sindhu - carrying crude oil produced in ONGC’s Krishna Godavari deepwater block off the eastern coast.
At its peak production, this project will add 7 percent each to India’s oil and gas production, ONGC said.
Developed with an investment of over Rs 41,000 crore, the KG-DWN 98/2 Deepwater Oil Field M in the Krishna Godavari Basin is considered to be one of the most technologically complex projects in India's oil and gas industry to date, Reuters reported.
ONGC says the project is a key step in cutting India's dependency on crude and Liquified Natural Gas imports.
The drilling is located offshore the Godavari River delta in the Bay of Bengal, about 22 kilometres off the coast of Andhra Pradesh, in water depth of over 430 metres. It achieved 'First Oil' on January 7.
26 Years On, Tata Motors Splits Businesses
Tata Motors on Monday has said it will demerge its business operations into two different entities, its larger commercial vehicle business from its smaller Indian passenger vehicle business.
The move clearly represents some rapid value unlocking and reorganisation for this $42 billion automotive giant, particularly if you put the pieces together, or rather move them apart.
Before I go further, Jaguar Land Rover is a 100% subsidiary of Tata Motors but is much larger than both the Indian commercial vehicle and passenger vehicle business combined.
A small walk down history lane. Tata Motors was set up in 1945 as Telco to make locomotives and engineering goods, the locomotive part obviously went away as the Government moved in.
You may of course remember that we spoke about Grasim and Asian Paints in different contexts the week before, though both were born in the vicinity of 1947, as Tata Motors was.
The interesting thing is that Tata Motors has been a commercial vehicle maker for almost 45 years of its life since 1954, albeit in various forms of trucks, light and heavy.
The first car only arrived in 1998 in the form of Indica and Indigo in 2002. The Sumo, the ubiquitous SUV for a long time, came in 1994.
The transition to a car was a tough one for Tata Motors and was driven as much by will power as much as engineering capabilities and is of course another story.
The Tatas acquired Jaguar Land Rover, Britain’s largest automotive company, in 2008 and became the luxury vehicle business of the Tatas.
So the commercial vehicle business is worth around Rs 71,000 crore and represents roughly 41% of the market. The domestic passenger vehicle market is around Rs 48,000 crore but represents 13.5% of the market. Obviously because competition is stiffer here.
And therein lies an interesting fact.
The commercial vehicle business is larger but growing slowly while the passenger car market has more potential for growth, including via electric and that could have caused the split so investors get a chance to bet on growth separately without being weighed down by commercial vehicles..
JLR by the way is worth over Rs 222,000 crore and the total revenue is around Rs 351,000 crore.
Tata’s electric vehicles were launched 5 years ago in 2019 which of course became another subsidiary two years later in December 2021 and will, if reports are to be believed, go for an iPO as well in a year or so. Remember subsidiary and engineering and design company Tata Technologies which went public with a blowout IPO in November last year.
Back to the scheme of the demerger as we know, the company says all shareholders of Tata Motors would continue to hold the same identical shareholding in both the listed entities.
"The demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability," the company said in a stock exchange intimation.
Post demerger, one entity would house the commercial vehicles business and its related investments while the other would house the passenger vehicles business including PV, electric vehicles, Jaguar and Land Rover and related investments. The whole process could take a little over a year, though all these companies have been operating under independent CEOs since 2021.
Tata Motors chairman N Chandrasekaran said the three automotive business units are now operating independently and delivering consistent performance and would now better capitalise on the opportunities provided by the market by enhancing their focus and agility.
Incidentally, Tata Motors has some 90 consolidated subsidiaries, 2 joint operations, 4 joint ventures and 11 equity associations or companies in which it holds strategic equity.
It's a lot of ventures under one roof. But it's a long time too and a long way from locomotives.
RBI Cracks The Whip Again, This Time on IIFL Finance
The Reserve Bank on Monday barred IIFL Finance with immediate effect from sanctioning or disbursing gold loans after certain material supervisory concerns were observed in its gold loan portfolio, reported the Business Standard.
From what it sounds, it does appear that the company seemed to be giving away some loans without fully checking the purity of the gold that was being offered as collateral which in turn came to light at the time of auction when the borrowers defaulted.
The RBI said IIFL Finance can, however, continue to service its existing gold loan portfolio through the usual collection and recovery processes, the RBI said in a statement.
"The RBI has today...directed IIFL Finance Ltd to cease and desist, with immediate effect, from sanctioning or disbursing gold loans or assigning/ securitising/ selling any of its gold loans," it said.
The RBI said an inspection of the company was carried out by it with reference to IIFL's financial position as of March 31, 2023.
"Material supervisory concerns were observed in the gold loan portfolio of the company, including serious deviations in assaying and certifying purity and net weight of the gold at the time of sanction of loans and at the time of auction upon default...," it noted.
These practices, apart from being regulatory violations, also significantly and adversely impact the interest of the customers, the central bank added.
It further said the supervisory restrictions will be reviewed upon completion of a special audit to be instituted by the RBI and after rectification by the company of the special audit findings and the findings of RBI inspection to the satisfaction of the central bank.
There is a larger question about the Reserve Bank of India’s actions and the increasing number of them, including in the case of fintech companies like PayTM Payments Bank which in turn triggered howls of protest from the fintech community.
I reached out to Tamal Bandopadhyay, veteran commentator on banking issues and columnist with Business Standard and began by asking him if the RBI’s actions reflected a larger systemic problem arising out of the retail excesses of the last few years.
