On Episode 909 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Srivastava, Founder at the Global Trade Research Initiative (GTRI) as well as Deepak Ballani, Director General at the Indian Sugar and Bio-Energy Manufacturers Association (ISMA).

SHOW NOTES

(00:00) Stories of the Day

(01:00) Did A Big IPO Break The Market Just Now?

(03:45) Oil Prices Continue To Slide Downwards As Talks Progress

(06:35) India’s Banking Sector Saw Higher Credit Growth Than Deposit Growth In Fiscal 2026

(08:10) What Are The Real Options Ahead Of India On The US-India Trade Deal?

(16:36) Results Of A IIT-Delhi Led Study On Flex Fuel Compatibility For Ethanol Fuel Is Out. What Does It Say?

—

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 Wednesday the 24th of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from a rained out Mumbai, India's financial capital

Our top stories and themes apart from the fact that it is now raining in Mumbai and the monsoons have finally arrived…

Did a big IPO break the market just now?

Oil prices continue to slide downwards as talks between Iran and the United States progress.

India's banking sector saw higher credit growth than deposit growth in fiscal 26.

What are the real options ahead of India on the US-India trade deal?

And results of our IIT Delhi-led study on flex fuel compatibility for ethanol fuel is out. What does it say?

Markets, IPOs, Asia and the Rupee

Big IPOs, sometimes singly and sometimes a few in tandem, tend to break big market rallies.

We've seen it in India, of course, before and we seem to be seeing one play out in the global markets right now. The trigger, of course, is SpaceX. At least for now, SpaceX shares fell more than 3% in pre-market trading on Tuesday following a $400 billion sell-off on Monday after a post-debut rally fizzled out.

The space and AI companies saw considerable gains after a record-breaking IPO on the 12th of June, that's about 10 days ago, briefly crossing Amazon and Microsoft in market capitalisation but then subsequently falling back below both, according to CNBC. The SpaceX stock fell 16% on Monday and was further down, as we said, on Tuesday morning. On Monday, SpaceX's market capitalisation was $2 trillion.

Now, the problem is not SpaceX, loss-making as it is, but the droves of investors who dive into stocks like this which have high allure by liquidating elsewhere. Now, these investors could be both large and small, so it's not just small investors who rush. Meanwhile, the tech sell-off is accelerating with futures on leading U.S. indices falling on Tuesday morning, particularly in pre-market trade.

Stock prices of Alphabet, NVIDIA, and Oracle were all down on top of the losses seen on Monday. Asian markets were down with South Korea's KOSPI falling 10% thanks to Samsung Electronics and SK Hynix. European indices were also in the red with ASML, which is the Dutch company, retreating 5%, according to the Wall Street Journal, adding that the artificial intelligence rally seems to have gone in reverse in recent days.

This has been prompted by jitters over AI companies' heavy spending and looming Federal Reserve interest rate hikes, according to the Wall Street Journal report. Back to the KOSPI in South Korea, the two leading stocks, SK Hynix and Samsung Electronics, both fell more than 12% on Tuesday. Losses extended after a 20-minute suspension was implemented by the Korea Exchange in the afternoon, according to Bloomberg, which also quoted market watchers citing a combination of forced liquidation hitting retail investors who were trading on borrowed money compounded by a wave of selling tied to leveraged exchange-traded funds tracking the two chip giants.

And here is something to note and think about. Korea's top financial watchdog expressed regret having allowed leveraged ETFs or exchange-traded funds tracking Samsung and SK Hynix, warning that their negative side effects have grown significantly, according to Bloomberg. The products magnify market volatility through their daily rebalancing to maintain targeted leverage ratios.

Samsung's asset management product, targeting twice the daily return of SK Hynix, lost more than 25% on Tuesday, according to the Bloomberg report. In all of this, there is good news somewhere, specifically that oil prices are still trending downwards. They fell after the U.S. on Monday waived long-standing sanctions on Iranian oil sales for two months, obviously signalling progress in talks between Iran and the United States, according to CNBC, which also added that crude futures were down about 1.6% to $76.68 a barrel, so under $77.

And benchmark Brent crude futures are now close to where they stood during the early days of the U.S.-Israel war with Iran, according to CNBC. Meanwhile, back at home, benchmark equity indices, the Nifty and Sensex, fell sharply too. The Nifty 50 was down 278 points to 23,824, and the Sensex was down 893 points to 76,200.

The broader markets saw the Nifty mid-cap and small-cap also fall by about 1% and 0.5%. Now, we've referred to and highlighted some of the concerns around private credit markets and funds, which at this point are more of a concern in countries like the United States and not in India because of apparently more prudential lending. That being said, it's worth noting that Apollo, a private markets giant, is halting investor redemptions in its main retail-focused private credit fund, which has a large exposure to U.S. software companies after it was hit by a near negative 17% spike in withdrawal requests during the second quarter, according to CNBC. Apollo said it will cap withdrawals at 5% of shares in the Apollo Debt Solutions vehicle after investors rushed to put out about $2.4 billion or about 17% during the three-month period.

Offshore investors have apparently put in more requests than onshore ones. All of this comes after the $26 billion fund, which is a non-traded business development company which offers wealthy retail investors exposure to higher-yielding private credit assets, saw a 11% plus spike in withdrawal requests in the previous quarter, according to CNBC. Back home, the Securities and Exchange Board of India has proposed allowing direct market access for all investors, a mechanism that's currently open only to institutional investors, and direct market access allows buying and selling securities without relying on a broker's intermediary dealing desk.

Now, this is part of a consultation paper that was put out on Monday, and SEBI said that with technological advancement, benefits rising out of DMA may be passed on to other categories of clients, subject to risk management checks applicable for respective categories. And the rupee ended slightly weaker on Tuesday, as a churn in U.S. rate expectations boosted the dollar to a one-year peak against a basket of peers, which also drove global equities lower and put pressure on Asian currencies, according to Reuters, which added that the rupee closed at Rs. 94.73, down very slightly from its previous close of Rs. 94.67.

How is Deposit Growth in India’s Banking Sector?

India's banking sector recorded a 13% annual deposit growth for 2025-26, though credit growth remained higher, keeping the CD ratio above 81%. This underscores the need for stronger liability mobilisation, according to a report from Crisil Ratings. While banks are relying more on term deposits, CASA, or Current Account and Savings Account, ratios have declined 39% due to customer preference for higher-yield products, even as competition for retail deposits remains intense, according to that report.

The Crisil Intelligence report also says that public sector banks still dominate deposits, though private banks are gaining share. Households continue to anchor the system and contribute about 70% of CASA balances, despite a gradual decline in their share, according to the Crisil report, adding that non-resident deposits and regulatory measures, like the recent ones for attracting NRI flows, may provide incremental support to growth. Rural and semi-urban markets also present a key opportunity as they exhibit higher CASA ratios but remain underpenetrated, says the report.

CASA stands for Current Account and Savings Account, and a CASA ratio is the ratio of deposits in current and savings accounts to total deposits. The report also says, additionally, lower-ranked states show stronger CASA profiles and lower credit penetration, offering scope for both deposit and credit expansion, supported by regulatory initiatives aimed at improving regional banking balance.

What is the Current State of the US-India FTA?

The United States is focused on securing a fair reciprocal trade deal with India that opens markets for American exporters and delivers benefits to both countries, the U.S. Embassy in India said in a social media post on Tuesday.

U.S. Trade Representative Jameson Greer met India's Trade Minister Piyush Goyal in New Delhi on Tuesday to take negotiations forward on the interim agreement between the two countries. Earlier, India's state minister had said that India was seeking a competitive advantage over rival nations before rolling out a much-delayed trade agreement after both countries had agreed on the initial framework. Bloomberg reported agencies quoting the minister saying India is unlikely to implement the agreement until it secures a competitive edge on tariffs.

He said that the issue currently pending is that India's duties need to be lower compared to those of competing nations, or rather, the duties that India faces when it exports to the U.S. The framework for the pact was finalised before the U.S. Supreme Court ruled in February that Trump's previous tariff policy was unlawful. So where do we stand, particularly in the context of commitments made earlier and the more basic question, do those commitments matter, like the one to import $500 billion worth of goods from the United States in five years? I reached out to Ajay Srivastava, founder of the Global Trade Research Initiative, or GTRI, out of New Delhi, and I began by asking him how he was seeing the deal at this point.

INTERVIEW TRANSCRIPT

Ajay Srivastava: The 6th February India-US joint statement says that the US will be lowering its reciprocal tariffs from 25% to 18%. In return for India doing many things in goods and services, technology, buying products. So essentially they were lowering from 25% to 18% reciprocal tariff.

But now that is illegal. Reciprocal tariffs have been held illegal by the US Supreme Court judgement on February 20th. So today US has nothing to offer to us against what they are seeking from us.

So in the context of what the minister said, what the US did is that after reciprocal tariffs were gone, they started investigations, Super 301 investigations, two investigations. One on forced labour and second on excess capacity. Not only against India but against 60 countries.

And the reason to my mind is very clear. Right now US has nothing to offer to any of the countries. We are in the process of negotiating trade deal with US but others like European Union, Japan, South Korea, many others, they did a trade deal and after doing the trade deal US has started these 301 investigations.

Why? So that people don't leave the trade deal. Because now they have difficult time explaining to their domestic audience what they are getting from the US.

Once reciprocal tariffs are gone, they are not getting anything from the US. So what minister says, I understand it that they will be in future imposing some tariffs under 301 investigations and that tariffs will be lower on India and higher on Indian competitors. But assume this happens, we hear this US side also talking in high stone that this may happen that initial offer of 18% may be retained broadly.

So India can have edge over the others. But understand if that happens, what will we say? That means their super 301 investigations are totally compromised.

They are just a means to extract concessions. If they are not compromised, how they can offer better deal to India over its partners. So minister is saying this but for me, it's difficult to understand how US is going to do this.

This will jeopardise the integrity of their entire 301 investigation process.

Govindraj Ethiraj: So just to put things in relation to where we were before April 2025, where could we land now? Or where are we right now? And where could we land?

Because the Supreme Court, as you said, has already reduced tariffs to 10%.

Ajay Srivastava: So Supreme Court held that reciprocal tariff legal. So today tariffs, if I'm exporting something to US, the tariffs are MFN tariffs plus 10% or for some things like metals, steel, aluminium, etc. It may be 50% or 25%.

But essentially MFN tariff plus 10% on most products, even this 10% will go on 24th July, when these 10% tariffs will expire, will lapse. So from 24th July, if US doesn't impose any fresh tariffs, it will be MFN tariff regime. That means pre-April 2025 regime.

Govindraj Ethiraj: That's where we are right now. Okay, what is the larger context here? We are looking at a $500 billion of import that we have committed to.

My understanding from the Commerce Ministry through conversations is that they are quite keen to actually fulfil it, whether by importing aircraft or data centres or chips and so on. So we are not apparently seeing a challenge there. So where could this be going?

I mean, should we be still bound to that $500 billion, whether or not we can achieve it? Or should we be looking at some other structure?

Ajay Srivastava: So this $500 billion came from February 6th, India-US joint statement, and where US was offering a reduction in reciprocal tariffs from 25% to 18%. And India was offering all these things, including buying a $500 billion worth of goods. One of the clauses in that joint statement was that if any of the partner country, US or India, they change their tariff schedules, then other side will be authorised to walk out or change its offer.

So US side of offer is totally collapsed, the collapse of reciprocal tariff. So India has the full liberty to change their conditions or walk out of that joint statement and negotiate a fresh trade agreement. As far as Commerce Minister or anybody saying that $500 billion worth of goods is okay for us, no, it's not okay for us.

Today our imports from US are about $45 billion. So in five years time, it will be $225 billion. Even if we buy 100 Boeings, and all these data centres, we can't spend more than $100, $150 billion.

And so there will be a huge gap. And we have seen how rupee is faring. The moment market sees that India has committed, no need to buy, India has committed to buying $500 billion, you know, market is going to react and rupee may be under pressure.

And there is no need, US doesn't have many things to supply to us. You know, if we would have been talking about China, of course, we don't want to increase our trade deficit, which is already high from China. But today we are importing like last year, we imported goods worth $131 billion.

Five years multiplied by five is 131 is $650 billion. So buying $650 billion from China, I mean, it's okay for us because we buy things which we need. But with China buying 500 is too much, we don't need those much things.

Govindraj Ethiraj: Right. So given that we are close to an agreement, what could in your mind be the shape of this agreement as things stand, given whatever we've said or not said so far?

Ajay Srivastava: I want to look at the legal document which says one side has changed its conditions, other side should walk out or renegotiate the deal. Deal at the previously existing conditions is not possible because conditions have changed. India has to look at the deal, you know, if possible, delay.

Govindraj Ethiraj: Right. The supplement to that question is, can we do it or will we do it? Because in your note, you've also pointed out some of the geopolitical shifts that have happened, including India's name being taken off the Indo-Pacific Alliance.

Ajay Srivastava: What was happening is that the US was trying to contain China for decades. And now they finally realised in the past one, two years, no, China is equal, if not bigger than US. So that's why the concept of G2.

And that's why they have to forget the things like containing China, and things like Quad or Indo-Pacific Command, all these things were part of that, even IPEF, which was signed last year, Indo-Pacific Economic Framework. These were all agreements for supply chain resilience framework agreement. These were all things to contain China.

Now US is very clear, they cannot contain China. They have to treat China as equal. The moment US realises this value of India as a strategic partner falls, that's what is happening.

That's what we should observe. Now they see India as a market. They would like to pressurise us to get as much market from India as possible.

Govindraj Ethiraj: And that's a useful note to end on. Mr. Srivastava, thank you so much for joining me.

Ajay Srivastava: Thanks, Govind.

What is the compatibility like for Ethanol Blended Fuel?

There is considerable discussion on how higher levels of ethanol blending will work in terms of economics and engine performance, and what car and two-wheeler owners will have to do to gear up for this new fuel regime.

For one, it does seem like the higher blends, since we're already running our vehicles on E20 or 20% ethanol, are still a little while away, while E85 fuel, that means 85% ethanol, has recently been introduced. Its use is currently limited to flex fuel vehicles, specifically designed or calibrated to handle higher ethanol blends. To get a sense of this, I reached out to Deepak Ballani, director general of the Indian Sugar and Bioenergy Manufacturers Association, which represents ethanol manufacturers and distillers.

They recently imported ethanol conversion kits and worked with IIT Delhi to test them on a BS4 Maruti Suzuki Swift Desire running on E20, E85, and E100 fuels. The study apparently reported no damage during the trial, and I began by asking Deepak Ballani what were the key takeaways from this study at this point.

INTERVIEW TRANSCRIPT

Deepak Ballani: Yes, we had in 2024 imported few kits from Finland and we had requested IIT Delhi to test it on different cars. So they tested on both BS-IV and BS-VI Maruti Suzuki Swift and basically it was tested for almost 25,000 km with the blend starting from E12 to E100 and you know what basically the conclusion of the study was that both BS-IV and BS-VI petrol vehicles can potentially be converted to flex fuel operations and using this retrofitted kit and in this entire testing there was no structural or mechanical damage was reported in either test and the vehicle across the entire test programme up to E100. So this was a complete establishing a technical proof of concept and provided the evidential basis of ISMA's ongoing engagement with the regulatory authorities. Basically however you know a lot of regulatory approvals may be required later on.

At its core a flex fuel conversion kit actually comprises of a ethanol contents and sensor. It's actually connected in line with the fuel line. There's a control processing unit which is a small electronic module.

There's a wiring harness connecting the control unit to the vehicle's fuel injector signal. There's a coupler fuel line adapter and a bluetooth enabled monitoring interface. You know these are some things which perhaps could be made in India.

These are not very technologically exotic and they sit well within the India established electronic sensor and auto component ecosystem.

Govindraj Ethiraj: Right so you're saying that all of this kicks in before the fuel injection system. I'll come to the conversion kit in a moment but E20 is something that is obviously being supplied already in the country. So at what time does or rather what point does it transition to a flex fuel system as opposed to what we're doing right now which is using ethanol blend in existing cars and two wheelers.

Deepak Ballani: E20 we have already achieved. You know all the vehicles today are E20 compliant and you know it was achieved almost five years ahead of its target. Originally we thought we'd achieve by 2030 but because of the conducive programme and the investors confidence industry coming forward.

You know there's a huge capacity of ethanol which has been put up in the country and the government also expedited accelerated the entire ethanol adoption and we have achieved 20 percent. Now what forward because we have a huge capacity in the country. We are importing almost 85 percent or 90 percent of our crude.

So can we actually reduce this import and have a higher blending so that we can import less of crude less of petrol. So perhaps the government is already now shifting to the mode where we can go for higher blend. We recently saw E85 will be launched at a differential pricing.

It was launched in Delhi at rupees 82 just 20 rupees less than the E20 kind of base pack. So we have the capacity now we have to move forward in higher blend.

Govindraj Ethiraj: So my question Deepak is you know E20 is what we are already using so and of course there is some concerns about it as well but let me not get into that right now. My question is at what level of blend will you be or will you have to shift to a flex fuel vehicle or a flex fuel kit enforced vehicle.

Deepak Ballani: Let us understand what is a flex fuel. Flex fuel basically is a modified heist engine which works on any blend of fuel. It can work on E0, it can work on E20, it can work on E25, it can work on E85.

Having said that typically specifically I want to answer your question. See at the moment we are in E20. We are already testing through ARAI.

The government is getting the vehicles tested whether the existing vehicles could run on E25. For example if the tests are successful that the current vehicles can work on E25 the base blend might move to E25. That means effectively all existing vehicles can run on E25.

So flex engine typically could run beyond E25. Perhaps it could be E85, E100. Typically flex engine will work.

Basically it will work mostly it works on all the blends but it is recommended that you run on a higher blend which is E85, E100 and that is the entire purpose of having an ethanol that means a flex fuel vehicle that the vehicle can run a very high blend on E85 and E100.

Govindraj Ethiraj: Right and you said that the test showed that it's running fine without any damage to the vehicle. So that is one concern whether there could be any damage but the other is performance and durability of components and things like that. Any insights on that?

Deepak Ballani: There is a company called E-Flex system of Finland. We had imported that kit. You know it actually uses an ethanol sensor to adjust the fuel injection dynamically without altering the factory ECU and it has demonstrated very reliable performance across all tested ethanol blend and even on the emission side you know the kind of results we have was within the regulatory framework the higher whatever regular BS6 regulatory framework and a higher emission framework.

So in all the parameters we have found that it is coming within the range which we had anticipated. So there is no cause of concern of using the conversion kit or converting the existing BS6 or BS4 into a flex.

Govindraj Ethiraj: Right and I'm going to come back to the engine in a moment but there will be some reduction in efficiency or no reduction in efficiency or mileage because that's what all Indian consumers want to know.

Deepak Ballani: There would be definitely because this is the calorific value of ethanol is less than the petrol so there would definitely be reduction in the efficiency. The mileage is likely to go down on E100 to about 25%.

Govindraj Ethiraj: To 25% or by 25%?

Deepak Ballani: By 25%. If the mileage is 20 you can perhaps or at E100 the mileage would come down to maybe 15 or 16 and that is why the precisely the E85 fuel has been kept at 82 rupees litre or 20 rupees less than the normal petrol to compensate for the loss in efficiency.

Govindraj Ethiraj: Right and you're already saying that at least under this test there is no damage to any other component in the system either in the engine itself or in the injection and so on.

Deepak Ballani: No absolutely not that is what the test has shown but we will have to go for a very larger testing and that is why precisely I am saying this will require a formal regulatory testing across a wider vehicle. We have only done with Maruti Suzuki so perhaps you know the ARAI we have written to Ministry of Road Transport to officially start testing this vehicle and whatever tests are required for the kit they must do it before I launch it in the market.

Govindraj Ethiraj: Got it. So the kits were imported from Finland you said and therefore now to make it popular we'll have to manufacture locally so what is the likely price you feel at this point given what you understand of the market and or the aftermarket and do you feel that this would come inbuilt from OEMs or is it something that people will have to purchase separately?

Deepak Ballani: If you talk about the imported kits the kits are being made in US, it's also being made in Brazil, Finland, many other countries. So the imported flex wheel conversion kits are normally priced between 40 to 60,000 landing costs in the country. This is definitely a prohibitive for most Indian two-wheelers and four-wheeler car owners so definitely a domestic manufacturing essential but cannot begin without a regulatory framework.

It has to the cost has to be also brought down to around 20,000 rupees for the consumers to start adopting it so therefore the local vendor development has to happen but before that the policies have to be clear, the regulatory approvals have to be clear.

Govindraj Ethiraj: So would this process be somewhat similar to let's say how people have retrofitted CNG as in terms of cost and efficiency derived thereof?

Deepak Ballani: Yes, it is very important that vehicle manufacturers have to be taken in confidence. There has to be a framework for co-validating third-party retrofit kits. Perhaps in order to ensure that the warranties are not voided, there is no issues in terms of repair if the customer has any concern specifically with respect to warranty.

I believe the OEMs will have to be taken into confidence, some ecosystem, some protocol will have to be developed where there has to be a mainstream adoption and also regulatory approvals for that. So I believe that is extremely important that it has to be done in conjunction in discussion with OEMs so that we don't have any problem later on. Specifically consumers don't have any problem later on after they instal the flexible conversion kits in their respective vehicles.

Govindraj Ethiraj: Right Deepak, that's very useful. Thank you so much for joining me.

Deepak Ballani: Thank you.

What is Microsoft’s current take on AI?

Microsoft CEO Satya Nadella is joining a growing effort to take on AI giants OpenAI and Anthropic, telling the Wall Street Journal how the race for AI supremacy has taken shape with a small group of companies capturing the value of the world-changing technology, even as they make dire prophecies about safety risks and job losses, insisting they need vast resources for limitless expansion.

Nadella told the Wall Street Journal that you can't say, hey, all white-collar jobs are gone, and this could even be a weapon, and we will use all the power to build data centres. The public, he predicted, wouldn't tolerate just a few models and companies doing all of the learning for the world. While he did not directly name OpenAI Anthropic or Alphabets Google, he made it clear that Microsoft is seeking to steer the AI race away from a future dictated and controlled by frontier model builders.

Microsoft has rolled out in recent weeks a suite of low-cost models meant to drive prices down for customers, bracing from the sticker shock of skyrocketing AI builds, according to the Wall Street Journal report. Microsoft also released CoPilot CoWork, an autonomous AI agent allowing users to choose various AI models, including cheaper ones, as they complete long-running tasks. Microsoft is one of OpenAI's oldest partners and has invested billions in helping build the company into what it is today.

After years of tensions, according to the Wall Street Journal, the two companies struck a deal recently that allowed OpenAI to expand its ties to other large tech companies, even as Microsoft reached a multi-billion dollar agreement with Anthropic. Nadella told the Wall Street Journal there was room for every company to thrive, and he predicted that they would be very successful new companies. The report also says that finding itself without a competitive frontier model, Microsoft has decided instead to use its deep pockets to join the ranks of companies trying to turn models into commodities.

Axios reported earlier that Microsoft was considering providing a version of DeepSeek on its CoPilot platform. He also said that the new model for AI deployment will be more democratised, with societal benefits that are widely shared and where companies avoid dependency on a small group of frontier models. Nadella criticised executives who've thought of AI technology as a tool for reducing costs through job eliminations.

According to him, "no, how about we think about reorganising jobs"