On Episode 896 of The Core Report, financial journalist Govindraj Ethiraj talks to C S Vigneshwar, President at FADA.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Asian Markets Dive, Indian Markets On Edge Again

(03:08) A Slew of Measures to Attract Foreign Portfolio Investments and NRI Savings is Not Working Yet.

(10:46) Why Indian Car Sales Hit a Record High in May

(19:27) Airline Profits will Halve This Year Despite Revenue and Seat Loads Rising

(20:47) Will a No Car Friday in BKC in Mumbai Work?

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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 feedback@thecore.in.

Good morning, it's Tuesday the 9th of June and this is Govindraj Ethiraj broadcasting and streaming usually from Mumbai but in transit right now.

Our top stories and themes…

Asian markets dive, Indian markets on edge again.

A slew of measures to attract portfolio investments from overseas investors and NRI savings is not working yet.

Why Indian car sales hit a record high in May.

Airline profits will halve this year despite revenue and seat loads rising.

Will a no car Friday in Bandra-Kurdla complex in Mumbai work?

The Markets, The War, and FPIs

What a day it was in Asia after Wall Street.

We discussed the volatility on the Nasdaq Composite just yesterday, highlighting once again how the markets can produce dramatic upswings and also downswings. It's the kind of extreme moves even the bravest and most seasoned of investors would worry about. On Monday, South Korean stocks took a sharp dive as investors pulled out from AI stocks.

The KOSPI index fell as much as 8.8%, triggering a 20-minute trading halt by the stock exchange shortly after market opened as memory chip makers like Samsung Electronics and SK Hynix crashed, according to a Bloomberg report. The South Korean market had overtaken India in market capitalisation and value just a week ago. Intraday moves of 5% or more are common in Korea now, partly thanks to the popularity of leveraged exchange-traded funds tracking Korea's chip and the rebalancing trades required for such products, according to the Bloomberg report.

Elsewhere, it is with some interest I noted that several investors in India want a piece of the SpaceX IPO buy that's opening. SpaceX's long-awaited IPO, expected to fetch a $1.75 trillion valuation, has set off a frenzy amongst retail investors clamouring for a share of Elon Musk's rocket satellite and AI empire, according to Reuters. Several valuation experts quoted in many places is too high.

SpaceX has apparently earmarked as much as 30% or $22.5 billion in shares for retail investors, which is apparently rare for an IPO that is usually dominated by institutional buyers. Trading under the symbol SPCX, SpaceX has picked a handful of brokerage firms to distribute shares in the IPO to retail customers in the US. If you have an overseas trading account, you can bid from India, but of course you could also buy when it lists later this week.

The point to drive home is of course the volatility, particularly right now with massive fund movements between markets and asset classes, including Bitcoin, too, in this case the SpaceX IPO. Back home, the Nifty 50 and Sensex ended lower, thanks to increased tensions in West Asia. Once again, the Nifty 50 was down 243 points to 23,123 and the Sensex was down 719 points to 73,524.

The Nifty mid cap and small cap were down 2 at 1.4 and 1.9% each. There's more action on the fixed income side. Global funds apparently bought about $469 million worth of index eligible bonds on Friday, which is the most since June 2025 after the Indian government scrapped taxes on overseas investment in government securities and added new long tenor bonds to the fully accessible route under which securities are eligible for inclusion in global bond indices, according to Bloomberg.

All of this did not help the rupee on Monday, which was down 0.8% in its sharpest fall in four weeks to settle at Rs 95.70 per dollar, which also suggests that while all these moves are welcome and may work in the medium to long term, they may not necessarily move the needle immediately. Bloomberg quoted HSBC saying that India may not see significant pickup in foreign demand for sovereign debt over the next three months as investors stay cautious on global inflation. He also said that El Nino risks and renewed expectations for rate hikes are likely to weigh in the first half of the third quarter.

Barclays said India needs about $7 to $8 billion a month in capital inflows to fund its external account, while the Reserve Bank measures may bring in about $5 billion a month over the next few months. India's relatively low real yield means that yield-seeking investors are not going to be particularly attracted. Overall, they think the pace of rupee depreciation may slow, but the overall path remains one of further depreciation.

Bloomberg Goldman Sachs said the steps should help limit depreciation and stabilise the dollar-rupee pair, but they said that to be clear, they do not expect substantial spot appreciation either. They also said that the rupee's depreciation is not out of line with other key energy importing currencies in the region, and they expect that any renewed capital inflows should and will be used to rebuild the reserve buffer and unwind the short-forward book. Meanwhile, Punjab National Bank expects the banking sector to raise between $35 to $40 billion via foreign currency deposits under the Reserve Bank's new scheme announcement or unveiling, which is similar to a 2013 scheme.

The Reserve Bank of India will bear the full hedging cost for a three- to five-year foreign currency non-resident or FCNR deposit, it said on Friday, as part of a broader set of measures to encourage dollar flows and stem the depreciation pressure on the rupee. The scheme will allow banks to offer overseas customers a more lucrative rate of interest to pull in dollar deposits. Reuters quoted Punjab National Bank's CEO saying in an interview that the rate the banks will offer will be higher than the U.S. Treasury rate and definitely attract investors.

Three-year U.S. Treasuries are at 4.2%, while five-year notes offer 4.27%. Currently, non-resident deposits earn 3.5%, but with the Reserve Bank bearing the hedging cost, banks will be able to offer a higher rate to customers.

Oil, Gold and GDP

Meanwhile, full-blown uncertainty returned to West Asia as fresh attacks were launched by Israel and Iran at each other. Brent crude futures were up again, closer to $97 a barrel, which does suggest that prices are staying in that range, that's $95 to $100, most of the time, which is also the band most economists are working with to work out inflation and price impact, including in India.

Israel said on Monday it hit a petrochemical plant in Iran's southwest, along with strikes elsewhere on military targets. Oil prices have climbed just under 60% since the start of the war in late February but remain below highs marked in March when Brent had touched $120 a barrel, according to a Reuters report. Gold and silver prices are meanwhile being pushed down, with exchange-traded funds in India coming under pressure on Monday, and according to a Business Standard report, many exchange-traded funds in silver from HDFC, SBI, Kotak, UTI, amongst others, were down between 6 and 5%.

Gold ETFs were also down, including LIC, Tata, HSBC, HDFC, and Axis, which were down about 2% on Monday. Spot gold prices internationally were at about $4,319 per ounce. That was on the back of another fall of about 3% on Friday.

Now, on the broader economy back home, a lingering question, of course, is how inflation will behave in response to all these price shifts and hikes that we're seeing. One estimate says India's inflation likely rose to the Reserve Bank's medium-term target of 4% in May thanks to a pickup in vegetable prices and now higher fuel costs, according to a Reuters poll of economists. Inflation has otherwise remained below the Reserve Bank's 4% target for 15 consecutive months.

But then, as we know, fuel prices have gone up four times in May, pushing up transport costs and food inflation is continuing to rise from last year's low levels. The June 3rd to 8th poll of 38 economists has forecast inflation rising to 4% in May from 3.48% in April, according to Reuters. Meanwhile, while Indian markets are not really going anywhere for some time, they've been getting deeper in recent years as more investors have flocked in.

The Securities and Exchange Board of India chairman at a conference on Monday said that capital markets are increasingly becoming a core avenue for household savings and wealth creation. In a report quoting him in Business Standard, he said India has about 145 million investors in the securities market, with the investor base growing at 20% annually. Mutual fund assets have surged from about $12 trillion to over $80 trillion over these years, and household participation, of course, has grown.

He said household financial savings as a share of GDP has risen from about 20% in 2023 to about 21.7% in 2025. Equity issuances touched about $4.5 trillion, that's 450,000 crores in 2025-26, and 366 IPOs raised about 190,000 crores during that year. Market capitalisation has risen from about 69% of GDP a decade ago to about 128% right now, despite all the corrections, according to him.

Corporate bond issuances are over 900,000 crores, underscoring the growing role of markets in capital formation, according to him.

Why is their a reverse on Premiumisation?

We spoke yesterday of a reverse in premiumization of sorts, carmakers going big on entry-level cars, where consumers were also showing more interest. Ditto with other categories, including both durables and non-durables.

Indian companies are rolling out smaller packs on shelves to charging higher prices at checkout as they scramble to protect margins thanks to surging oil freight and insurance costs, as well as strained household budgets, which put pressure on purchasing abilities, according to Reuters. Consumer goods companies like Hindustan, Unilever, Godrej Consumer Products, and Dabur have already rolled out low-to-mid single-digit price hikes across categories, with Britannia also preparing similar moves. Pricing power remains weak in mass segments, with companies holding the line on 10 rupee packs and shrinking product sizes instead of raising prices outright, according to the Reuters report, which also quoted a Dabur top official saying,

Why is the Government Speeding up PNG adoption?

The government's push for higher adoption of pipe natural gas for household cooking could gain momentum if the price gap between PNG and LPG is widened, according to the managing director of Indraprastha Gas, who spoke to Business Standard.

The government has been pushing for a faster transition to LNG, supplied via piped route, in order to reduce dependence on LPG. LPG comes through refineries and LNG from oilfields. According to him, the delta between PNG and LPG is about 10 percent.

If it increases to, say, 30 percent, then the transition would be quick, he said.

Why are Auto Sales doing well in India?

India's automobile retail sales posted the best-ever May numbers across passenger vehicles, that's three-wheelers, tractors, and overall registrations growing 10 percent compared to May 2025, according to the Federation of Automobile Dealers' Associations. Passenger vehicles grew 23 percent, tractors 11, two-wheelers 8, and commercial vehicles 5 and three-wheelers 4 in this May-to-May comparison.

More customers are shifting to electric vehicles as well, and that increased to over 11 percent in May, thanks, of course, to higher fuel prices and the anticipation of it. In passenger vehicle sales, rural markets grew 30 percent against urban markets at 19 percent. I reached out to C.S. Vigneshwar, president of FADA, based out of Coimbatore, and I began by asking him how he was seeing the trend in sales since the goods and services tax price reductions in September 2025.

INTERVIEW TRANSCRIPT

C S Vigneshwar: Ever since the GST has been remodelled and repackaged, the 2.0, we've been quite consistent in terms of our viewpoint that this growth, which has been absolutely breakneck ever since September, is going to stay. After every quarter, we get asked whether it's going to be there forever. It may not be there forever, but it's going to be there for a long, long time to come.

The overall metrics, the economics of it has been quite supportive. When you look at the F4 rate, it's been quite stable. When you look at the GST, it's 7 plus percent.

So all these things add on to how it's been performing. More importantly, we also look at from the point of view of across the markets. I think across the verticals, whether it is passenger vehicles, commercial vehicles, two wheelers, three wheelers, tractors, we've been seeing this growth happen.

The passenger vehicles, we grew at about 23%, which itself is great. Given the challenges, the headwinds of the monsoons being delayed, you had the heat wave, you also had the price increases in fuel, you also had the West Asia crisis.

Govindraj Ethiraj: But despite that, I think it's been doing well. When people walk into dealerships, I mean, what is really driving their purchase decision today? I mean, if we are seeing such a jump, what's changed apart from the fact that prices have come down, particularly for entry-level?

C S Vigneshwar: The entry-level has been doing really well, especially this has been heartwarming to see after a few years of struggle, both in terms of two wheelers and passenger vehicles, and passenger vehicles also the cost of a vehicle acquisition after the GST reduction. The manufacturers also were very, very aggressive in pricing these vehicles and it went back to 2019 prices. That's really helped.

The credit is still strong, the money availability is good. So the banks also are quite aggressive in lending. And also from the point of the passenger vehicles and two wheelers, I think there's a lot of element of aspiration there.

It used to be very need-based acquisitions for many decades. But right now, because of the kind of products out there and the aspirations of our young population is also driving this. And vehicle purchases, yes, there's a 3-4% increase in a fuel price, I don't think is affecting the market as much.

But of course, it hurts. It sometimes hurts sentiments.

Govindraj Ethiraj: I probably would think that without these headwinds, the growth would be new and stronger. Obviously, we are seeing a lot of action in the entry-level cars. And we can see I think the numbers even for the big players, the entry-level car segment numbers are now almost close to SUVs, which was the big driver earlier.

How are you seeing it from dealership perspective?

C S Vigneshwar: As long as we are happy, even happier when the small cars start selling well, because this is a kind of a very strong base for future mid segment and high segment cars. So that's really helping. It's like farming, we are able to farm over a period of time by showing value to the customer.

We are also looking at lifetime acquisition of customers. When they buy the small cars, our dealerships are quite well equipped. So we're able to give them a midsize car experience in terms of service, etc.

So that way we like to keep the customer for life.

Govindraj Ethiraj: Right. And perceptionally, you know, we've seen for several years now this tilt towards SUVs and SUVs for how they look and feel and so on. And today, obviously, the entry-level are also looking smarter, there's much more electronics.

So people are buying that. But have people changed their, or rather behaviourally, are people now okay with smaller cars? And have SUVs sort of taken a step back?

Or how are people assessing it is really what I'm trying to understand apart from the price. SUVs are something which is going to stay and this we have seen in every country across the globe.

C S Vigneshwar: What we are seeing right now is those customers are still going towards SUVs. But there was a bunch of customers who didn't turn up at our showrooms. They have probably got the second-hand cars or they're satisfied with the two-wheelers.

Now, these customers are actually moving towards purchasing their cars, new cars, small cars. As you said, they are well equipped. But whatever's said and done, the more you move up the ladder, whether it can be the mid-segment or the top the high-end segments, the premium segments, there are more things which can go into a car.

There's only a limit what we can put in a small car. Perhaps they're doing right now fantastically good cars. But the larger cars you buy, the more space, more price is there so that the volumes can play with you, give better features for the customer.

Govindraj Ethiraj: Right. And you said that these are the newer customers are now coming in or walking into dealerships, particularly for entry-level cars. And would you say that earlier they were only buying second-hand or in two-wheelers or are they switching?

That's what the data says.

C S Vigneshwar: Because for nearly two years, there was a lull in the entry-level segment. And we saw a growth after the GST reforms because the prices were up. As you rightly said, new vehicles are coming in with better features.

So all these things are certainly helping the entry-level segment. And for us, the entry-level segment is pretty much a lot of what we work towards because it really helps us build a portfolio for the future.

Govindraj Ethiraj: Right. How are manufacturers responding to this shift in demand that we are seeing now or you're seeing now?

C S Vigneshwar: I would say the Indian manufacturer is a person who's Indian manufacturer in terms of the Indian industry. There can be OEMs from outside India too. They realise how nimble the market is.

The market really demands top quality, great features at a very competitive price. So most OEMs have been very nimble to respond to this. And even going to the future with also a VUCA world, as you call it, and with technology changing so quickly, I think the manufacturers have to be even more nimble to make sure that they are able to satisfy the aspirations of the Indian customer.

Govindraj Ethiraj: Right. This was month of May. Now we are seeing a full month or we will see a full month of higher petrol prices or diesel prices, and there could be other stresses on income.

So how are you seeing June, at least looking at how things have been in the last week or so? June has been good.

C S Vigneshwar: The last week, the walk-ins have been good. We've also been talking to different dealerships across India. We also have monthly surveys and nearly 60% of them are expecting an extremely strong quarter, which means June being the end month of the first quarter, financial quarter.

Our dealers have been telling us to wait for another strong month.

Govindraj Ethiraj: Good note to end on. Vignesh, thank you so much for joining me.

C S Vigneshwar: Thank you.

What is the Impact of West Asia on Commercial Aviation?

Airline profits are expected to collapse by half this year, thanks to the war in West Asia combined with higher fuel costs. The industry will, however, continue to grow, though, on top-line and passenger loads. Airlines are expected to achieve a combined total net profit of about $23 billion in 2026, roughly half the previously projected $41 billion, according to a note from the International Air Transport Association or IATA.

Net profit margins are expected to be 2 percent, roughly half the previously projected 3.9 percent. Net profit per passenger transported is expected to be about $4.5 billion, half the $9.1 billion achieved in 2025. Significantly, total industry revenues are, however, expected to rise to about $1.16 trillion for 2026, compared to about $1 trillion in 2025.

Moreover, passenger load factor 2 is forecast to continue to rise to new highs, with airlines expected to fill about 84 percent of seats over the year, which is more than the 83.5 percent in 2025, according to those IATA numbers, which added that passenger numbers, its overall passenger numbers, expected to touch $5.1 billion in 2026. That's up about 2.4 percent, and cargo volumes are up 0.2 percent, to about 71.7 million tonnes.

What is the new Friday Rule for BKC and why do we need it?

Mumbai's Bandra-Kurla complex is set to launch a new initiative aimed at reducing congestion and encouraging sustainable travel.

Under the plan, every Friday will be observed as Public Transport Day, with nearly 200,000 professionals encouraged to travel by train, metro, and bus, instead of using private vehicles, according to a Hindustan Times report. The programme, a first-of-its-kind effort focused specifically on a major corporate district, in this case, BKC, will begin this week. That's the 12th.

The initiative has received, in principle, backing from about 90 companies and organisations in BKC. There is, of course, a lot of criticism already, saying that it's being launched at a time, or rather in a week, when we could well expect rains. But it's being implemented by the MMRDA, that's the Mumbai Metropolitan Region Development Authority, in partnership with BEST, Mumbai Metro Rail Corporation, the traffic police, auto rickshaw unions, and WRI India.

So Friday has been chosen because work schedules are generally more flexible, making employees more willing to try alternative travel options. Officials said the initiatives would be monitored closely for about three to four months, and they will assess challenges every week and introduce changes. Findings show that 82 percent of commuters would consider using public transport if services became more reliable, convenient, and better connected.

Last mile connectivity is, of course, a challenge in BKC, which is a major corporate hub. The other one is Lower Parel in central Mumbai, where we are located as well.