On Episode 961 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Srivastava, Founder at the Global Trade Research initiative (GTRI) as well as Dr. Michael Chui, senior fellow at QuantumBlack, AI by McKinsey.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Benchmarks Slide Again Despite Oil Prices Falling

(02:25) Only 40 Of 53 Companies That Listed Their Shares In 2026 Are Trading Above Their IPO Issue Price

(04:40) More Indians Are Acquiring Credit Cards But They Aren’t Using Them

(05:36) What India Needs To Learn From Canada’s Trade Response To US

(15:42) Companies Are Investing More In AI But Where Is It Paying Off?

(26:24) Why Gold Vaults Are Running Full World Over

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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 Friday, the 28th of August, and this is Govindraj Ethiraj, broadcasting and streaming weekdays from Mumbai, India's financial capital, but in transit right now.

Our top stories and themes…

The benchmark slide again, despite oil prices falling

Only 40 of 53 companies that listed their shares in 26 are trading above their IPO issue price.

What India needs to learn from Canada's trade response to the United States, more Indians are acquiring credit cards, but they aren't using them.

Companies are investing more in AI, but where is it paying off? A new McKinsey report.

And why gold vaults are running full world over.

Markets, Credit Cards and IPOs

So here's some good news, foreign portfolio investors have brought in close to $2.8 billion so far in August, 2026 into the Indian markets according to official data.

This makes it the second consecutive month of foreign portfolio investor inflows. And here's the important part, the net inflow in August is the highest since September, 2024. And that's the point from which Indian markets have been mostly flat, as you know.

At that point, FBIs had brought in about $6.8 billion into Indian equities. In the month of July, that's last month, FIIs or FBIs had invested about $2.1 billion. So while the numbers are small, the signs are large, so to speak.

Meanwhile, oil prices continue to fall, but did little to lift the benchmark indices on Wednesday, which extended losses to a second session. The Sensex was down 539 points to 76,933, and the Nifty 50 was down 116 points to 24,019. In the broader markets, the Nifty mid cap and small cap were also down slightly.

Now, shares of HDFC Bank fell for another session, being the third one on Thursday, which also pulled down the benchmark indices. Reuters report said its shares have fallen as much as 2.5% to their lowest in 2.5 years, losing about $2.6 billion in market value at close of trade. The HDFC stock is down more than a quarter this year and is on course for its worst drop since 2008.

Meanwhile, only 40 of 53 companies that listed their shares in 2026 are trading above their IPO issue price, and they've collectively raised about 67,000 crores according to a Business Standard Report quoting Prime database. Only 36 have managed to stay above their listing price. In contrast, 13 trade below their issue price and 17 below their listing price.

This of course gives you a sense on how the IPO market is performing broadly and how it is suppressing the secondary markets on one end and also providing or demonstrating average to poor secondary market performance when it lists, except of course in a few cases. Now, this of course gives you a sense on how the IPO market is performing broadly and how it's also suppressing the secondary markets by virtue of supply and flow and also only providing average to poor secondary performance that's in the secondary markets when they list, except in a few cases. Meanwhile, oil prices fell more than a dollar on Thursday, continuing a fall over several days on expectations that talks between Iran and Qatar might open the state of arms and reduce disruptions according to a Reuters report, which added that Brent crude futures were down to about $86.48 on Thursday morning.

The rupee also fell, giving up some of its gains on Thursday as importer dollar demand picked up pace, said Reuters, ending at 95 rupees 54 paise down slightly for the day. On Wall Street, Nvidia shares were up 4% on Wednesday after its CFO, Colette Kress, on a call to discuss the company's second quarter earnings said to expect 70% revenue growth in the company's 2028 fiscal year, according to the Wall Street Journal, which also added that this is significantly better than the 45% growth analysts polled by FactSet had predicted. Kress also defended Nvidia's strategy of using its balance sheet to help customers on the earnings call, something that has caused concern among investors.

These labs, Kress said, face a bottleneck, however, in accessing all the computing power they need to develop products and improve models, so they need Nvidia's financial help. She said that we recognise the scale of this support and we know some will call this circular financing. We see it differently.

The equity returns on our invested capital will be excellent, according to that Wall Street Journal report. Back home, India has about 123 million credit card users now and while the numbers are growing steadily every month, credit card spends are not matching the growth, suggesting that people are acquiring cards for other or limited objectives. Credit card spends recovered to about 209,000 crore rupees in July 2026, while the card base grew at its fastest pace in over a year, crossing 123 million, a Care Edge report said, adding that the resulting divergence between card growth at about 10% year-on-year and spending growth at about 7.4% year-on-year has led to softer per-card spends, indicating that penetration gains are outpacing usage.

Care Edge expects credit card spending in August to remain in the range of 204,000 crores to 209,000 crore rupees. Additionally, it says with festive demand expected to strengthen from September and card penetration continuing to deepen, industry growth remains healthy.

L&T expanding presence in the Middle East

Larsen & Toubro has said it's won seven of 13 orders since early July from the Middle East.

A Bloomberg News report says, while L&T only shares a range instead of giving out the exact order value, the estimate from Bloomberg says, or other pegs, the average at about $11.6 billion in the ongoing quarter ending September 30th. Now, this surpasses the orders reported in the preceding quarter, though by only a small amount. Even at the lower end of the range, the most conservative calculation, the new wins are estimated to be worth about 93,800 crore rupees compared to about 111,000 crore rupees in the ongoing quarter.

L&T has been expanding its presence in the Middle East, which now contributes to about a third or 30% of its revenue for the year ended March 31st. The signing of these projects obviously also signals that businesses are resuming infrastructure spending over there, and L&T has said it has received contracts for a gas compression project and offshore facilities, each valued at more than 15,000 crore rupees.

What Lessons for India From the US-Canada tariff Spat?

The U.S. may also be moving towards returning diplomats to its Middle East embassies as early as this week, according to a New York Times report quoted by Bloomberg, an early indication that the region is beginning to prepare for a gradual return to normalcy.

A blazing trade war that's erupted again between Canada and the United States has highlighted India's own trade talks with the United States and their current status, which is, of course, frozen. A note from the Global Trade Research Initiative says that for India, which is also negotiating a trade deal with Washington, Canada's experience is a warning. India should seek clear, binding, and durable tariff concessions before making commitments on agriculture, digital regulation, critical minerals, or government procurement, an agreement that merely reduces some U.S. tariffs while leaving Washington free to impose fresh duties under Sections 232, 301 or other domestic laws would offer little certainty, according to GTRI.

I reached out to Ajay Srivastava, founder of the GTRI, and I began by asking him how he was seeing the cumulative impact of the trade deliberations so far, including those that are happening outside India.

INTERVIEW TRANSCRIPT

Ajay Srivastava: First is how our current exports are doing to US. They are doing as good as they should be. Last year we faced tariff on about 6 months of the whole year and still our exports were in the positive territory.

They did not grow but they did not decline either. So just 0.9% growth. Despite 50% tariffs half the year, we survived.

This year we are facing almost similar tariff as whole of the world is facing. Last year 50% was extreme on us. We were facing the highest tariff.

This year right now everybody is facing those Section 232 tariffs on steel, aluminium, auto components etc. Then 10% tariff most countries are facing because of post labour Section 301 investigations. But this is equality of disadvantage for most nations.

So we are okay with that. We say okay, it's like enhanced MFN tariff charged by US even though they are WTO incompatible. So we have equality of disadvantage.

We don't have any problems with that. Now third is what is happening is US maybe in few weeks time announcing the results of excess capacity investigations under Section 301. Canada we have seen they have one of the biggest FTAs.

It was called NAFTA earlier, signed in 1991. It was renamed under Mr. Trump's, renegotiated under Mr. Trump's insistence in 2019-20, renamed as USMCA. Now Trump is not happy and he has imposed tariffs on Canada again.

Because he was not happy with the terms of USMCA. Before this last month, he imposed tariffs on Brazil. Now none of these things they belong to trade policy.

You know Section 301 says if US goods are suffering in a partner country, US may take action. But no, Brazil was, they were not happy with the Brazil internal policies. You know like we have UPI.

They have fixed instant payment system. So they were not happy because MasterCard and Visa, they were not getting adequate entry into that. Same as in India.

So they were pressurising Brazil. Brazil didn't listen to them. Then they were not happy with Brazil because Brazil was not buying ethanol from them.

Much like us. So Brazil they imposed 25% tariffs. And Canada they have imposed.

Both have resisted. Canada has said they will return tariff dollar by dollar. So we expect Canada to impose tariffs soon.

So in these circumstances, I will not be surprised if US imposes some unilateral tariffs, country specific tariffs. You know, so far we have been talking about broad tariffs. For example, Section 301 tariffs imposed on 60 countries.

But Brazil, Canada is the only country these have been isolated for a special tariff treatment. So I will not be surprised if US does that. In fact, something may be coming very soon that because we are buying oil from Russia, that Russian tariffs up to 100% may be coming very soon.

It has been passed by the US Senate on August 7. Now in the first week of September, it's likely to go to the House there. And if it's voted, it will go for presidential assent.

And he has already indicated that he will be agreeing to this. So in that case, you know, largest buyer of oil is China. Buyer of oil from Russia is China.

But last time also US dared not impose any tariffs on China because of this. But they imposed 25% on India. This time also, I feel they will dare not have any courage to impose tariffs on China.

And it may be imposed on India. So I expect, I will not be surprised if US imposes extra tariffs on India and then bargains internally with Indian side. Okay, we'll lower some of this.

And so you do a trade deal with this. But the problem with this approach is that there is no peace signed up trade deal. European Union, Japan, South Korea, all have signed trade deal with the US last year.

And despite that, they're all facing Section 301 investigations. New investigations can be opened any days on any country, including the trade partners. So when I don't have peace, even after signing trade deal, why give up so much advantage?

So I have yet to convince myself that what is the deal from the US side on India? It's not clear to anybody. Nobody's talking about this.

Govindraj Ethiraj: Right. So I guess that answers the question on where or what is the status of the bilateral trade agreement, which in normal circumstances or going by the pace it was seemingly going at, should have been signed by now and details revealed to the public. So if that's not the case so far, does that mean, as you said, that one is, of course, that any new tariffs could come at any time?

And secondly, if that happens, then what should India do?

Ajay Srivastava: First is deal was almost done. We have seen the outlines on February 6th joint statement between India and US. It said so many things, but US side of offer disappeared when Supreme Court after two weeks on 20th Feb, they said that reciprocal tariff, which the US was promising to cut for India from 25% to 18%, they disappeared.

Supreme Court said it's all illegal. You cannot impose it. Since then, since February till today, US does not know, we don't know what is the offer from the US side.

From Indian side, we know we have an inkling of what we are going to offer from that joint statement of February 6th. What US has to offer, we don't have any idea. And I presume when I heard Sergey Go talking 3-4 days back that it's almost done at the very final stages, legal language is being cleaned, that doesn't give me any clarity.

I still want to understand, like last time they told very clearly, it's 25% to 18%, what is now? So that point is not clear. I don't know what's going to happen.

Ultimately, India should seek its best interest. Best interest is that it should ask US, okay, if you want trade deal, you have to give me certainty that this is what you are offering. Tomorrow, you are not conjuring something new, new tariffs, new restrictions on Russian, because I'm buying Russian oil, because I'm using UPI, because I'm not buying ethanol from you, because whatever, they can conjure 100 reasons.

There's a long list of reasons, US problems which have been listed in one of the document, National Trade Estimates issued by USTR. The report lists more than 100 problems US has with India. And you'll be amazed to know what kinds of problems are listed there.

You know, they have problems with our MSP, they have problems with everything. So you cannot please US, that point should be clear to everybody's mind. If anybody has any different views, I'll request them to go and see the National Trade Estimates and decide for themselves.

Govindraj Ethiraj: Right, India, UK, FDA is now more than a month old. And India, EU should start, I don't know what the exact situation is, but it should be on the way. And we are also having conversations with other countries, including we had a trade visit to Japan.

How do you see all of this counterbalancing, or at least to some extent balancing?

Ajay Srivastava: I don't see any counterbalancing for this. US is a big market and comparatively easy market compared to say European or Japan. So we export one fifth of our merchandise to the US, the largest trade partner for India.

Europe is a big partner, but Europe has that problem of carbon tax. Today it's applicable on six products, steel, aluminium, etc. In three, four years time, they'll be covering all the industry products.

So imagine what will happen to things like FDA after five years. Their goods will be coming at zero tax to India. Our goods will be charged high carbon taxes, ranging from 20% to 30% to 40% or even more.

So it will be a problem, but the problem will be filled after three, four years when the tax quantum start increasing and product coverage increases. Japan is a great partner, but our exports to Japan have not increased substantially. Our imports have increased at faster pace from Japan, but exports are not increasing.

And for that, I think we have to work on quality and Japan's non-tariff barrier, which many of them, they are not very transparent. Right.

Govindraj Ethiraj: Mr. Srivastava, thank you so much for joining me.

Ajay Srivastava: Thanks, Govind, for inviting me.

A new Report by Mckinsey on AI

Consulting firm McKinsey & Company in a new report, the state of AI in 2026 on the road to ROI, or return on investment, has said that companies are investing more in AI and for individual workers that appears to be paying off. The report draws on insights from about 1,700 respondents across 97 countries, including 87 in India, to take stock of where organisations are in the AI transition, and quotes 80% saying AI is making them more productive.

32% say they've passed on at least one software product or feature because they could build the functionality themselves using AI coding tools. However, the share of organisations reporting any EBIT or earnings before interest and tax impact from AI at 37% hasn't changed from last year, and yet about 60% expect to increase their AI investment over the next year. The report also says that the small group deriving value from AI offers a clue.

Nearly three quarters of AI high performers are fundamentally redesigning workflows compared with just one quarter of everyone else. So what lies ahead? I reached out to Michael Chui, senior fellow at McKinsey and co-author of the report, and I began by asking him, what are the common global themes and local for that matter in terms of AI utilisation that he was seeing?

INTERVIEW TRANSCRIPT

Dr. Michael Chui: Yeah, I mean, we've been surveying enterprises around the world and their use of AI for about eight years now. So we have a quite long longitudinal data set. I think one thing that we continue to see is an increase, a continuing increase in just the regular use of AI.

And so that's quite interesting. It's not only becoming broader, but deeper, you know, companies are generally moving from experimenting to piloting to scaling. We see that continue over time.

So that's terrific. And actually, on a sort of local micro level, for instance, in the sales and marketing function, we're seeing companies using AI to increase their revenues. We're seeing the ability to reduce costs in various parts of operations.

So all of those are very, in some ways, encouraging. You know, this promise of AI is being realised. At the same time, one thing that we did find a bit of nuance, which again, we don't think that it suggests that there's no value from AI.

But in fact, the percentage of companies that said at an enterprise level, it has increased or attributed more of their EBIT to their use of AI actually had not increased over the past year. So, you know, it's 37 percent or so. You know, we do expect that to move over time, but it was a bit of a disappointment and sobering to say, you know, our interpretation of that is it isn't that easy.

It is really hard work to rewire an organisation. We know that from the client work that we do with organisations around the world. And I think what this survey shows is that indeed that, you know, again, the promise of AI is there.

We see regular use of AI. But in fact, it's in some ways quite a challenge for enterprises to capture the value of AI.

Govindraj Ethiraj: Sanyam Bhutani So if you were to list, let's say three verticals within organisations, so you talked about sales and marketing, for instance, so what would be those top three where you see the maximum application and to some extent, the return on investment, which is what the report is talking about?

Dr. Michael Chui: I mean, one thing that we documented and it's, you know, a lot of people have talked about it, but we've quantified it a little bit. Basically, a third of the respondents to our global survey say they're using agentic coding tools. And, you know, again, I live in San Francisco.

You know, it's all tech all the time. But, you know, almost everyone's writing software now. If you're at a bank, you're writing software.

If you're an auto company, you're writing software. And so this really has a broad based set of potential. And we're actually seeing companies start to use these agentic coding tools.

We do know that there are capabilities advanced a great deal, basically, you know, last December or so. Right. And so as a result, not only has the technology moved, but, you know, people have really started to adopt it.

So I think that's one of the remarkable things that's happened in customer service. That's another area where quite naturally, the language capabilities of these technologies naturally is brought to bear the agentic capabilities of these technologies. So not only can you talk to something, but it might be able to, you know, initiate a workflow like, you know, a return or an order and those sorts of things are there.

At the same time, it's my point previously, this is hard work. You know, you don't want these things to hallucinate. You want them to be accurate.

So there's again, it's not a sort of just leave it and go type of thing. It takes real work. You need to create evaluations.

You need to continue to monitor and make these things better over time.

Govindraj Ethiraj: Right. Your survey says that 32 percent have said that their organisations have passed on at least one software product or feature because they could build it themselves using AI coding tools. So what could those be, at least if you've been able to glean that?

Dr. Michael Chui: The fun things about running a survey is you come up with questions that you wish you'd asked or questions you'll ask at the next survey. So we can't say from the survey what those products or features that companies didn't buy. But from our other discussions with clients, you know, a few examples come to mind.

You know, what we used to call extract, transform and load ETL or data ingestion, you know, all of the work that goes into taking, you know, data from one system of record and moving it to another system of record. Previously, you might have to, you know, engage some professionals to do that over some time and, you know, pay some money. You know, oftentimes now you can just ask the systems, you know, go read this manual, please move this data from here to there.

Right. And you could prompt it better than that. But that type of exercise, you know, data transformation is one of the things that these software tools are able to do pretty well.

And we also see them doing, you know, a front end programming types of things as well. But, you know, what's remarkable is, you know, if you look at the reports of what some of these systems are doing, you know, literally, you know, at the level of, you know, optimising models for silicon, they're really being used. And so it's extraordinary what's happening.

I'm talking to you with a microphone here. You know, one of the one of the funny trends, again, around San Francisco, probably other places around the world is, you know, instead of hearing the click, click, clack, clack, click, click, clack, clack of software engineers typing on their keyboards, oftentimes, it's just a bunch of people whispering. And that's how software is made nowadays.

It's very strange.

Govindraj Ethiraj: Yeah. You've talked to many enterprises in many countries, and of which India is about 87 respondents. So what would you say is the response or has been the response from India, if you could separate that?

And are all responses generally consistent across countries or some countries standing on for some reason?

Dr. Michael Chui: Yeah, honestly, the amount of consistency across countries is quite remarkable. With that said, to the extent to which there are differences, it often has a lot to do with a different mix of industries within countries. But, you know, again, in terms of take, for example, IT services, you know, IT services, a lot of software engineering, a lot of use of agentic coding tools, that's as true in India as it is in other places in the world.

So, you know, I think it has a lot more to do with the mix of industries in India. With that said, you know, India is a very technologically aspirational place and the competitive pressures, particularly if you're in IT services. You know, this point that I made before, you know, avoiding buying software products or features, you know, it also creates another competitor for IT services firms as well.

And so the IT services firms know that. And so they're bringing these technologies to bear. And it's, again, going to be one of those, you know, just increases the competitive intensity because you have these tools that can create your customers have superpowers.

You have superpowers if you are an IT services firm.

Govindraj Ethiraj: Right. And any areas that enterprises are optimistic about? I mean, as they say, OK, here is where we're going to dive deeper into any areas that they're concerned about in the context of AI.

Dr. Michael Chui: Yeah, I mean, one of the remarkable things is, you know, people have talked a lot about tokenomics. People are worried about the costs of AI, which makes sense, right? I mean, we describe this as the road to ROI.

You know, when the I's very high, you need a much bigger R. And so people are quite concerned. Some people are using different ways and their whole discipline around how to use the right model, sometimes open weight models, sometimes using routing to move different workloads to different places.

I think there's a whole discipline around tokenomics that CFOs and CTOs and CIOs and CDAIOs are starting to apply. And in fact, we documented, you know, 20 percent of organisations say they've constrained their use of AI because of its costs. And yet, at the same time, a majority of companies say they're going to invest more next year.

And so, you know, what that says to us is they actually see the value. They see it coming, even though they're constrained or annoyed about the costs. And so they're going to work on the cost thing and try to drive the benefits at the same time.

And that's really what we see that move towards, you know, how can I get those benefits and still, you know, be able to optimise my investments as well. And any concerns? I mean, any fears or concerns?

You know, we look at risks all the time. We do see risks appearing in different places, you know, whether or not it's, you know, cyber risks. We all are very aware, you know, some of the remarkable stories about these systems that even in test environments have escaped and those sorts of things and how quickly they're able to find and exploit vulnerabilities, those sorts of things are concerns.

Of course, accuracy, hallucinations also comes up. You know, it's common for those things to happen and cost, as I mentioned before, in terms of road to ROI, that statistic I mentioned to you that, you know, 37 percent hasn't moved in terms of companies that have reported any EBIT impact from and even separated out a small percentage of what we describe as high performers who, you know, report that at least five percent of their EBIT is related to their attributed to their use of AI. Again, that's six percent of our sample that also hasn't moved. Right.

AI high performers continues to increase over time. They're not all companies that are developing AI, but it hasn't yet in the past year. And so, you know, that's a bit of a challenge.

At the same time, we also discovered when we asked about individuals use of AI, that 80 percent said that it increased their productivity. Also of a similarly high percentage said and help them make better decisions. And so we have a bit of this gap, whereas individual workers, they're experiencing the, you know, the acceleration, productivity, the power of these technologies.

And yet the organisations in which they work haven't yet and are, again, you know, we know from other work that that's because it's not just an individual using the technology, capturing value. Many times it's an entire workflow, which involves far beyond the work of an individual, your bottleneck somewhere else. And so in order to capture that value at an enterprise level, you need to restructure your and rewire your entire workflow.

And so, again, that lesson keeps coming up. That potential is clearly there because, you know, individual saying this is helping me do my work. Now, how can we help the entire enterprise do its work?

Govindraj Ethiraj: That's an interesting note to end on, Michael. Thank you so much for joining me.

Dr. Michael Chui: Thanks so much for having me.

So Much Gold, So Few Vaults

Gold vaults are running full and there is a global race to build vaults for precious metals from Switzerland to Singapore, according to the Financial Times. Now, this was not the case before, but rocketing gold prices, which have doubled in the last three years and an accompanying surge of demand from wealthy individuals who want to hold their gold in physical bar form has prompted a rush of activity in otherwise sleepy vaulting sector, according to the FT.

The chief operating officer of Swiss Gold Safe told the FT that they had six vault locations and every single one of them, they have to expand right now. It's not only about space, the insurance limit, which can be up to $5 billion on a single vault also creates the need for additional vaults, he explained. Interestingly, in Switzerland, vault space is becoming more constrained because many disused Second World War military bunkers, which have since been a popular option for storing precious metals, are going back into service by the military, which wants to bolster its defences, according to the FT.

It's not just the storing of gold. Swiss Gold Group MKS PAMP told FT that they are looking to build a substantial vault specifically to cater to the group's richest clients so they can visit their gold in an elegant setting that compares to a five-star hotel. According to him, when people are leaving more than $200 billion or more with them, they want to make sure they have the right infrastructure in place, which is, of course, for clients storing a minimum of $50 million worth of bullion who can and do visit their gold stored inside dedicated cages.

Gold prices had hit a record of $5,595 per ounce earlier this year. That was up 104% to the year. Prices have, of course, cooled off from the January peak and around $4,600 per ounce, but remain higher than a year ago.