Foreign Investors Are Dumping Stocks
Overseas funds have sold a net of 16.8 billion dollars through September 26 and are already closing in on the record set in 2022
On Episode 692 of The Core Report, financial journalist Govindraj Ethiraj talks to Nandivardhan Jain, CEO at Noesis Capital Advisors.
SHOW NOTES
(00:00) Stories of the Day
(01:29) Foreign investors are dumping stocks like no tomorrow
(06:23) Why gold and silver imports are rising despite high prices
(09:14) India signs a trade agreement with four European nations including Switzerland and Norway.
(10:16) India’s economy needs to expand at an extraordinary 12.2% pace each year to solve its underemployment crisis, Morgan stanley has said
(12:14) Why hotels are springing up near airports across India
(23:13) Air Travel and Cargo Demand Show Robust Growth, IATA Reports, even as jet fuel prices continue to fall
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Wednesday, the 1st of October and this is Govindraj Ethiraj, broadcasting and streaming weekdays from Mumbai, India's financial capital, our top stories and themes. And of course, if it's October 1st, we are in the third quarter of the financial year and the fourth quarter of the calendar year. So time is indeed flying.
And that brings us to our top stories and themes.
The stock markets are still weak with foreign investors dumping stocks like there's no tomorrow.
Why gold and silver imports are rising despite high prices.
Investor Jim Rogers says when paper money is becoming less trusted in many countries, people are turning to real assets like gold, silver and copper.
India signs a trade agreement with four European nations, including Switzerland and Norway.
India's economy needs to grow at an extraordinary 12.2% each year to solve its underemployment crisis, says Morgan Stanley.
Why hotels are springing up near airports across the country.
And air and cargo demand show robust growth according to IATA, even as jet fuel prices continue to fall.
FIIs Are Selling
Today is credit policy day and this is also a holiday shortened week as we have no trading on Thursday being Gandhi Jayanti and the Sarah. We're also taking our usual market holiday break. The stock market saw losses for eight sessions now or have seen losses for eight straight sessions now and the Sensex and Nifty have lost 3% in these sessions.
Overall, September was, however, a better month, though only slightly with the Nifty and Sensex rising 0.8 and 0.6% each after having declined for two months earlier. India as a market is clearly struggling for lift and all signs are that this will not happen for some time. One reason is foreign institutional investors who are set to sell the highest ever this year.
Overseas funds have sold a net of 16.8 billion dollars through September 26 and are already closing in on the record set in 2022, according to data from Bloomberg. Now, this continued at the start of this week with provisional data pointing to another 319 million dollars of outflow on Monday alone. Now, the reasons are roughly the same.
And of course, they are also piling up. It's U.S. tariffs, H-1B visas, high valuations. And of course, China is a more attractive market.
On the other hand, other markets, including China, are hitting records. One example is Israel, and more on that in a moment. Valuations are dependent on earnings.
Profits for Indian companies in the MSCI index gauge are estimated to rise just 5% in 2025, which is down from 8% last year, according to Bloomberg Intelligence. The rupee too has suffered, falling about 3.7% versus the dollar in 2025, hitting a record low of 88 rupees 80 paise per dollar on Tuesday. More on the rupee in a moment.
But the rupee has fared quite badly, including in relation to other Asian currencies. Bloomberg says the NEC Nifty 50 index has lagged the MSCI Asia-Pacific Index for five straight months through September. And this is the longest streak since 2013.
And yet Indian stocks remain amongst the most expensive in the region, which also tells you something about the chances of possible appreciation. On the other hand, as we've been discussing here on the core report, domestic institutions are buying, investing about $66 billion this year. But mostly, or rather most of those investments are really acting as a cushion to sellers.
And sellers, of course, include foreign portfolio investors, but they also include a lot of smart money in India from a lot of institutional investors as well. One sign of optimism, on the other hand, is that valuation premia over Asian peers has shrunk to its lowest in more than two years, says Bloomberg, adding that just a few weeks ago, a Bank of America survey showed more regional fund managers overweight Indian stocks than underweight, while HSBC research is saying that the market might be nearing an inflexion point. But on the positive side, once again, the Nifty is up about 4% for the year and on track for its 10th straight annual gain.
Now, when we say year, we mean 2025 and not year on year, because year on year, we are down. Which brings us to Tuesday straight, the Sensex and Nifty closed lower after a fairly volatile session. At close, the Sensex was down 97 points to 80,267.
The Nifty was down 23 points to 24,611. In the last eight trading sessions, the Sensex has now fallen about 2,746 points. The Nifty has fallen about 813.
In the broader market on Tuesday, the Nifty mid cap 100 was down 0.01%. The Nifty small cap was up 0.08%. So very, very marginal movements. Now back to Israel, because it's interesting. Stocks there hit a record high, cementing their fifth successive quarterly rally, as investors bet that a 20-point plan agreed to by Prime Minister Benjamin Netanyahu and US President Donald Trump could hasten the end of the war in Gaza, according to a Bloomberg report.
The Tel Aviv Stock Exchange 35 index rose for the third time in four days, on course for a 6.7% surge this quarter. Tuesday's gains were led by Teva Pharmaceutical Industries, Phoenix Financial and Bank Hapo Alim. And back home, the rupee saw its fifth consecutive monthly fall against the US dollar and hit a record low on Tuesday, as trade tensions continued between India and the United States, pushing up dollar demand, according to Reuters, which added that the rupee settled at Rs 88.78 against the dollar, its weakest ever closing level, and down slightly from its close of Rs 88.76 on Monday.
So in September, the rupee has fallen 0.7%, which is its fifth consecutive monthly decline and down a cumulative 5% in the last five months. Now, where the rupee will go from here will be driven by foreign fund flows, tariff-led developments, and the dollar's reaction to the US government shutdown, which is of course the most immediate trigger.
Gold And Silver Prices Are Rising
India's imports of gold and silver nearly doubled in September from August, despite the high prices, as banks and jewellers rushed to build inventories ahead of festivals and escape higher taxes and imports, according to a Reuters report.
India spent about $5.4 billion importing 64 tonnes of gold and about $451 million to import about 410 tonnes of silver in August, according to government data. High imports by India, which is also the world's second-biggest consumer of gold, is set to support prices that hit records this week, even as demand languishes in top-buyer China, according to that Reuters report. Meanwhile, Jim Rogers, chairman of Rogers Holdings, told Business Standard the world was in a period when paper money was becoming less trusted in many countries, and people are turning to real assets like copper, gold, and silver.
This, he says, has been the case throughout history and will continue. And speaking about copper, we're going to come to copper, but later in the week. Jim Rogers said that while he owned both gold and silver at current levels, he wouldn't be buying more, but if prices go down, he would definitely add.
He says that he's not selling them either, because gold and silver are long-term insurance, and he did expect prices to go higher in the next couple of years. He says that the world is heading into a period of serious problems, and gold and silver amongst the few ways to protect oneself, and that's been true for hundreds of years and will remain true now. He also says that whether people are right or wrong about the reasons doesn't matter.
That's what they believe, and that's where they put their money, and I do the same. And well, he could be referring to most Indian households and the way they've approached gold and purchases of gold in many, many decades, if not longer. He also said in that conversation with Business Standard that equity markets in most countries have been on an unusually long winning streak, which leads to problems eventually.
He says he's not shorting equities yet, but he's very cautious. He was also bullish on copper, and like I said, more on that later this week.
Good Monsoons
India has now seen its strongest monsoon in five years, lifting prospects for crops such as rice and pulses and raising hopes that food prices may ease further. Rainfall from June to September, which irrigates about half of India's farmland and is important for the next planting season, was about 937.2 mm, said a report put together by Bloomberg, and this figure was about 8% higher than the long-term average and the best rainy season since 2020, according to India Meteorological Department data. The early arrival of the monsoon this year, followed by good precipitation, helped farmers allocate more land to crops such as rice, pulses and sugarcane, according to the government's agriculture ministry.
This could also mean better harvests and the further reduction in food inflation, which was down 0.7% in August, said the Bloomberg report.
And Some Trade News…
India's trade pact with four European nations, including Switzerland and Norway, will kick off today, which will boost exports of textiles, leather and food products, even as more investments could potentially come, according to the government.
Under the Trade and Economic Partnership Agreement signed last March, after nearly 16 years of negotiations, the European Free Trade Association, comprising Switzerland, Norway, Iceland and Liechtenstein, will cut tariffs on about 92% of tariff lines, while India will offer concessions on about 82% of tariff lines, covering 95% of EFTA exports. India has protected its sensitive sectors like dairy, soya, coal and other agricultural products. India is the EFTA's fifth-largest trading partner, after the European Union, the United States, Britain and China, with total two-way trade touching about $25 billion in 2023, according to government estimates reported by Reuters.
This could also spur Swiss investment, as it slashes tariffs on exports from chocolates to watches and machinery. India's economy needs to grow at an extraordinary 12.2% pace each year to solve its underemployment crisis, according to Morgan Stanley Economist, who said that the risk that millions of young Indians may remain locked out of productive work could fuel social strains at home. India is facing a dual challenge of unemployment and underemployment, Morgan Stanley Economist, led by Chetan Nair, wrote in a note on Monday.
The youth jobless rate stands at 17.6%, the highest in the region, while a surge of workers into agriculture had pushed farm employment to a 17-year high, according to that note. Without stronger industrial and export growth, accelerated infrastructure rollout and sweeping reforms to upgrade skills and improve the business climate, India risks falling into a job trap, according to Morgan Stanley, in a report put together by Bloomberg. Now, all of this would slow its ambition of becoming the world's next growth engine and also intensify outward migration pressures, even as H-1B visas are becoming more expensive, said the report.
It also said about 603 million Indians still live below the lower middle income threshold of $3.65 a day, based on the World Bank's 2022 benchmark. With the global lender, the World Bank, recently raising that bar to $4.20 a day, the number of Indians counted as vulnerable is set to climb further. Now, underemployment, according to that report and otherwise, refers to those jobs that don't fully utilize the skills, education or available work hours of a person.
Unlike joblessness, underemployment is more difficult to measure, since the definition is loose. Now, India counts anyone working for at least one hour in the past week as employed, including unpaid family labour, which also leads to significant underemployment, where most of the jobs are informal. And the government's own estimate of 6.3 to 6.8% growth rate, therefore, is lower than what is needed to address the unemployment issue in the country, according to that Morgan Stanley report.
Airport Hotels
If you are a reasonably frequent traveller like me, you would have noticed the new hotels springing up near airports in cities like Delhi and Mumbai. Airport hotels, once dismissed as peripheral stopovers, are now positioned as strategic growth engines of the hospitality sector, a new report from Noesis Capital Advisors, a hospitality advisory firm, has said. Now, this rise is fuelled by a couple of factors.
One is urban congestion has made them indispensable in places like Delhi, NCR, Mumbai and Bangalore, where staying near airports helps business travellers reclaim time lost otherwise in traffic, says the report, and also adds that at the same time, the commercial versatility has expanded because these hotels are no longer just transit points, but also serve as hubs for meetings, events and corporate gatherings, as we can see, once again, both in Mumbai and Delhi, amongst other places. The report says districts like Delhi Aerocity, precincts around Mumbai Airport and emerging zones near Hyderabad and Bangalore are transforming into full-fledged commercial ecosystems. Some of the international examples that are similar are Changi in Singapore, Incheon in Seoul and Dubai International, which have long integrated hospitality into their airport ecosystems, creating vibrant urban anchors, according to the report.
Moreover, it says that airport hotels enjoy yield advantages because of their dual demand-based transit travellers and commercial users, making them more resilient than many city centre assets. I reached out to Nandivardhan Jain, CEO of Noesis and author of that report, and I began by asking him what was driving this trend that we're seeing at this point.
INTERVIEW TRANSCRIPT
Nandivardhan Jain: If we come to hospitality, I've been into the industry for the last 16 years. I started Noises, which is India's largest hotel investment advisory firm in 2009, and since then we have done 2,400 assignments. On the basis of all the experiences, I can definitely, with full confidence, share with you that the aviation market, in terms of the hospitality growth, is one of the fastest growing segments in the hospitality field.
So right now, last year, we handled traffic of 211 million air passengers. Now, when the people are moving from point A to point B, and of that volume, and the markets are growing exponentially, it means very clearly you need more hotel rooms in and around the airports. And this trend will continue for the next two decades.
I can share some stats with you. Our per income right now is closer to 3,000 USD. And in China, in 2007, their per capita income was around 2,800, 700 or 800 approximately.
In 2010, they reached a critical number of 4,500. Their experience-led markets increased by 5x, which means aviation, hospitality, F&B service, experience, and demand for premium goods. These are all markets that increased by 5x because now there's more money in the wallet of a common man. We are estimated to reach a critical number of 4,500 USD in 2029 or maximum by 2030.
That's the time you will see real magic happen in terms of the demand. And all the smart hotel companies are sensing it. And already, there's a very strong demand.
Let me give you a small example like in Mumbai, which is at Mumbai Terminal 2 and Terminal 1. All the new supplies are coming to Mumbai around this area. I recently signed a hotel for 300 rooms in Mumbai for a 25-year lease, long-term lease.
And that transaction happened only because of the strong macro data with the Mumbai International Airport Aviation Market linking to the hospitality demand. So that's one of the largest and the most, rather expensive lease transactions till now in the history of the Indian hospitality market. And are you able to share the names and so on?
Yeah, it's going to be flagged as Iconica Hotel due to be in operation sometime next week. And they're already on the last leg of their pre-opening. And I think next week they will be making it commercially open for everyone.
It's part of the Royal Orchid Hotels Limited. Similarly, I completed a recent acquisition for a 192-room hotel at Kolkata Airport, which is the largest airport in eastern India. I'm giving you purposely two separate examples, one from the west, one from the east, for better understanding at a national footprint level.
So there, one of the sister companies of Tata Group acquired their asset and they're going to give it on a management to IHCA, which is that again their sister company. The whole reason why Tata Group thought of putting their own money is because the macro data is supporting that. The aviation market data supporting the hospitality numbers.
And as of now, there is very limited supply in and around Kolkata Airport, a quality supply. So this makes a perfect business case for them. And that's how we managed to successfully complete this acquisition transaction.
Govindraj Ethiraj: Right. So when people travel, if they're travelling for business and let's say conferences or meetings, I guess it's logical to some extent that they want to be closer to where their meetings are. So let's say if you take a city like Mumbai, which is more linear, maybe your work is in south Mumbai, your airport is in central or sorry, not central, but more north Mumbai.
So why is it that hotels are coming up near the airport? Is it only because real estate costs right now in some of these cities, it's less? Or is there a strategic reason for it as well?
Nandivardhan Jain: So this trend is very much visible across the metro cities, whether it's Mumbai or Bangalore or Hyderabad or Delhi Aerocity for that matter. So if I'm landing in Mumbai, my first preference is to invite all my guests, customers, clients to and around the airport so that I can save that crucial time of travelling from the airport to go. For example, if I have to go to south Mumbai, which is easily a travel point of one hour to one hour, 25 minutes.
Or if I work in BKC, I'd still prefer to invite them closer to my hotel, which usually I prefer in that case closer to the airport to come over there and let's have a meeting. Even if I have to go and if I have a long hour of meetings over there, I'll prefer to then stay in that micro market. So because of the transit traffic, which guzzles up a lot of your productive manners, this is a trend that you prefer to hold meetings closer to the airport.
Delhi Aerocity, where the infrastructure has come up beautifully well in terms of the hospitality, retail and the mice, which is one of the biggest revenue contributors to the industry. So that's what, you know, makes this work very well. If you check even the trends, what's happening in Bangalore airport, there are three very good prominent hotels operational in and around Bangalore airport and more than eight hotels are under development right now.
And recently a family office, one of the larger family offices acquired an asset in at Bangalore airport, again supporting the aviation and hospitality linked markets.
Govindraj Ethiraj: And as these airports grow, and since we've seen these trends elsewhere, when there is transit traffic, let's say we're not talking so much about business, but let's say more families and so on. You see that audience or that consumer also using these hotels increasingly?
Nandivardhan Jain: Let me give you an interesting stat, which I'm sure a lot of investors are gonna like. One airline to Goa from a regional connectivity, let's say if you start tomorrow, an airline from Amritsar to Goa or from Ludhiana to Goa or something similar Chandigarh to Goa. The one airline will generate a demand for 150,000 rooms for the Goa market on a random basis, which means now you will need to build four new hotels of 100 rooms, 400 keys in short.
That's the power of connectivity and aviation linked connectivity because for someone who's travelling through aviation as a route, his propensity to spend is also a little better than someone who's travelling through other modes of transportation, which can change the landscape of even the leisure markets. If you start having direct regional connectivity from, let's say Mumbai, direct to Coorg, why not? Right now, if you have to go to Coorg because it has to go through Bangalore, you need to consider Coorg as a part of the circuit, which is Bangalore, Isor, Coorg, Ooty.
Because if you're investing so many man hours to go there and reach there to that point of Coorg, you better think of, let me have a one week holiday. But let's assume if I have a direct flight from Mumbai to Coorg, or from Chennai to Coorg for that matter, or any other metro city, which is a captive market, then just imagine I can think of Coorg as a weekend destination. I can plan on Friday and I'm back on Sunday.
So that's what is very much required to develop. And with Odan's scheme, a lot of that developments are also happening at this point of time.
Govindraj Ethiraj: Last question, Nandivardhan. So if you look at the concentration growth of hotels across India, are you saying that basically airports and airport proximate hotels are the fastest growing category right now? It is one of the fastest.
Nandivardhan Jain: So MICE is very big. If you are considering developing something in the MICE segment, especially weddings focused in markets like Rajasthan or closer to Mumbai, Delhi and Sierra, there are huge opportunities there. Pilgrim is a very big opportunity.
If you plan to develop something in Varanasi or markets like Varanasi, I mean to say it's a huge opportunity waiting for you. Industrial markets, where new manufacturing units are coming up from British Labour to Dholera to Pimphi Chinchwad to Chakan. These are some fantastic opportunities out there, because every market has its own dynamics.
The investment has to be up to a certain level, considering what kind of ADR a customer can pay you. That financial economics is another subject, which we can take on some other day. But yes, if you ask me from the demand drivers, these are some of them.
Govindraj Ethiraj: And it's quite interesting and good to know, I guess. Nandivardhan, we've run out of time. Thank you so much for joining me today.
Cargo Demand Is Up
Global air cargo has seen its sixth consecutive month of growth, with demand rising 4.1% in 2025 August, compared to the same period last year. According to the International Air Transport Association, or IATA, capacity also grew 3.7%. IATA's Director General Willie Walsh said that the industry is adapting to shifting global trade patterns, noting that some demand is being diverted away from North America, which is fuelling stronger growth on trade lanes connecting Europe, Asia, Africa and the Middle East. And the shift is partly driven by shippers opting for air transport for high-value goods to mitigate risks from potential tariff changes.
Moreover, global goods trade grew about 5.4% year-on-year in July, providing a solid foundation for air freight. More interestingly and importantly, jet fuel prices in August were 6.4% lower than the previous year, representing the 14th straight month of decline, which is obviously bringing down operating costs for airlines. On the passenger side, the industry also showed strong health in August.
Total passenger demand rose 4.6%, compared to August, with about 6.6% growth in international travel. Capacity grew much slower than demand, but load factors were at a record high of 86%, indicating highly efficient aircraft utilisation.
