On Episode 960 of The Core Report, financial journalist Govindraj Ethiraj talks to Shankkar Aiyar, economic journalist and author; Ajay Kedia, metal and commodities expert; as well as Manish Gupta, Deputy Chief Ratings Officer at Crisil Ratings.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Foreign Investors Are Still Wary Of India

(05:44) Will The Government’s Overseas Roadshows For Investments Deliver?

(13:22) Gold Prices Are Rising Again, What Are The New Demand And Supply Forces

(19:04) India Inc May Have Slowed On Capex But It Has Invested Hugely In M&A, Says New Crisil Report

(27:23) Meta Agreed To Pay $16.68 Billion And Make Major Changes ​to Facebook And Instagram

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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 Thursday the 27th of August and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital on most days but in transit right now.

Our top stories and themes…

Our foreign investors still wary of India

Will the government's overseas roadshows for investments deliver

India Inc may have slowed on CapEx but it has invested hugely in mergers and acquisitions says a new Crisil report

Gold prices are rising again, what are new demand supply forces

And Meta pays or has agreed to pay about 16.6 billion dollars to resolve claims by states across the U.S. that it designed platforms to addict children and mislead consumers.

Markets, Oil and Treasury Markets

There is near unanimity that India Inc will have a strong second quarter having just delivered a strong first quarter which beats street expectations to some extent.

What there is not much unanimity about is whether the stock markets will reflect this growth as they have and even if they do it will not be in the benchmark indices and more likely in the mid and small cap space. The nifty mid cap 100 for example hit a record high on Tuesday closing about 0.5 percent up from its previous day and over the past year it's gained 11 percent compared to a two and a half percent decline in the nifty 50 according to a business standard report and there are other forecasts which are a little gloomier. India's stock market will trade lower by the middle of next year than it did at the start of 2026 according to a Reuters poll of equity analysts and this is the third quarter in a row that they have cut their outlook.

Moreover investors are looking at not just South Korea and Taiwan despite all the wild gyrations there but also markets like Thailand, Malaysia and the Philippines. Indian markets are down about seven percent this year and are on track for their weakest annual performance in more than a decade according to that Reuters report. So according to that August 13 to 26 Reuters poll of 28 equity analysts the nifty 50 has been forecast to rise about five percent from Tuesday's close of 24,334 to about 25,556 by end 2026.

It was then expected to rise to about 26,300 by mid 27 and 27,450 by end 2027. The sensex was predicted to reach about 81,600 by end 2026, 85,700 by mid 27 and 89,000 by end 2027. Now these were the lowest median forecasts since polling began for the end 2026 and mid 2027 levels last year.

Of course there have been cases in history where none of these forecasts have worked and the markets have gone completely berserk or perhaps even gone in the other direction. Now the index projections obviously run counter to India's macro growth numbers with the economy growing close to eight percent in recent years and the nifty 50 reporting 18 percent profit growth in the June quarter and that was the fastest in 10 quarters as we've discussed on the core report earlier. An analyst from modern shares told Reuters that when the entire world is doing well and India is not that tells me rosy economic data that looks good on paper is actually not that rosy.

As we know overseas investors have already sold about 25 billion dollars of Indian shares this year. The rupee has fallen about six percent against the and high crude prices currently around 90 dollars a barrel actually a little less and we'll come to that are making investors a little queasy. On the other hand more than 70 percent of analysts also said that a correction which is a decline of more than 10 percent or more was unlikely in the next three months.

Others were optimistic earnings will continue to see an improvement from previous years one analyst said adding that even if we assume baseline earnings growth for 2027 it is not difficult to breach the all-time high. And so on Wednesday the benchmark indices were down the sensex was down 183 points to 77 472 the nifty was down 126 points to 24 207. In the broader markets the nifty mid cap was down very slightly and the nifty small cap was up about 0.8 percent.

Oil prices were down though contrary to earlier occasions where falling oil prices would send markets up. Oil prices were down about 1.6 dollars to about 86 dollars 93 cents a barrel on Wednesday afternoon so just under 87 dollars a barrel. Gold has eased off as well after a three session winning streak and is now up for almost three months now and prices have climbed to their highest since the 14th of May following the US treasury department's recent bond buyback announcement according to Reuters and more on gold in a moment.

Now, much has been written about the bond market, but I like this line in an article in the Wall Street Journal with a description which said that "rising interest rates are a signal of trouble ahead; artificially suppressing it heightens the danger."

In that article written by Stanley F. Druckenmiller, Chairman and CEO of Duquesne Family Office—and also regarded by some as U.S. Treasury Secretary Scott Bessent's mentor—he wrote, and I quote:

"I have spent five decades trading on a simple premise: markets aggregate information no committee possesses, and prices are how that information reaches decision makers. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the U.S. has left. Debt management that even appears to follow the political calendar spends the one asset that took two centuries to accumulate: the credibility of the Treasury market. That asset doesn't regain its value so easily," end quote.

There has been a fair bit of criticism coming in against Bessent's move to reduce bond yields by intervening in the market of late, as we've been reporting, and this quote—or rather column—was a response to that.

FM Goes on the Road to Talk to Investors

Almost for a year, in the midst of tariff wars, actual wars, and heavy Foreign Institutional Investors' selling and a steadily declining rupee, The Core Report has been making a case that it was imperative for India's economic ministers to go on the road and talk to investors directly. One reason The Core Report has been making that case is also because of the consistent feedback that India was being shunned and ignored by investors—a dramatic contrast to past years. The situation has not changed much, but the welcome news is that the Finance Minister has hit the road, hopefully with a specific objective and desire to talk and sell the India story.

Finance Minister Nirmala Sitharaman is on a nine-day tour of Canada and the United States, focussing on trade, investment, and economic engagement. Commerce Minister Piyush Goyal is in Japan this week, where he is building a case for India as a trusted investment destination, according to Bloomberg, which quoted Sitharaman saying in Canada that India is the economy in which people should take interest. She said that global investor participation will ensure that India becomes an engine of growth, and everyone else can chug along. "India offers a combination that's difficult to match: scale, sustained growth, a young population, expanding consumption, and rapidly deepening capital markets," she said.

She also argued that the forces supporting India's expansion go beyond the current economic cycle, saying the nation's transformation is structural, and pointed to the rapid urbanisation, a growing middle class, and digital infrastructure, according to that Bloomberg report, which added that India and Canada are negotiating a Comprehensive Economic Partnership Agreement following a diplomatic reset over the past two years. I reached out to Shankkar Aiyar, veteran economic journalist and author, who also attended the Finance Minister's presentation in Toronto on Tuesday where he is, and I asked him how the pitch landed and whether the current efforts will help draw in the much-needed foreign investment.

INTERVIEW TRANSCRIPT

Shankkar Aiyar: Well, it's an interesting return of relationships with Canada. As you know that for three years back, relations had completely disrupted and we had pulled off our diplomats. So that reset of the relationship by Prime Minister Karni and Prime Minister Modi has seems to be working and they're working towards economic agreement of some form.

We already have a national security agreement. Canada is going to supply uranium to India. So all of those things have sort of given the momentum towards economic relationship better, made it higher priority among in both the governments.

And in somehow, in some fashion, Mr. Donald Trump has also been an accelerator of these moves. So I think that it's a good move. And I mean, if you think of it as a roadshow, she made a decent presentation in terms of what feedback she wants, what India has to offer.

So the landscape that she went through was rare earths, minerals, companies which can develop possible potential in the coastline of India's East Coast. Entry into financial sector, she emphasised, sort of underlined that insurance, banking are all open. You can have FDI in insurance and banking, in financial payment system.

So the person from NPCI was there. The person from the IFCA, the infrastructure development body was there. People from her department of economic affairs were there.

So she made a credible presentation on what she was looking for.

Govindraj Ethiraj: And what would you say, at least going by body language, was the response to it?

Shankkar Aiyar: Well, most of the investors were concerned about, I think, two things that, you know, the predictability of rules, the issue of compliances, the delays in permits and clearances, and of course, the delays in the courts. So India's problem of FDI, which we now are seeing sort of vividly on the screens in the net FDI data, is largely about what's happening in the global landscape in terms of interest rates and returns and the AI picture. It is also about what India needs to do and has been struggling to do, which is the endogenous factors, which we call, you know, the regulatory cholesterol, the compliance issues, the archaic laws.

Now, anytime you go to any presentation by an Indian minister inviting foreign investors to invest in India, the two permanent residents on that agenda are the issue of compliance as permissions and the issue of delays in courts. Now, there are two task forces that the government has appointed, which if you see, there are driblets of information coming either in the economic survey. So they are unable to convey a complete message.

For instance, if I want to build a hospital in Gujarat or in Maharashtra or elsewhere, how many permissions do I need? What is the timeline? What is the deadline that I would face?

Or if I want to come and invest in, say, a project to explore mines, then what is the number of clearances that would require? Those are the things that don't get done. And I don't know where the task force is at cutting down this thing.

So you hear that, you know, so-and-so states has eased something, we have abolished archaic laws. But the investor abroad wants to know, you were asking for 90 clearances yesterday, how many today? So if the government is able to say 40, 45, 30, 25, whatever, I mean, you know, so that helps.

So there was a lot of applause for a concept called deemed clearance. But that's really a lazy way of saying, okay, I can't fix the system. So, you know, I will give you deemed clearance.

I think they need to sort of focus on this, this endogenous issue.

Govindraj Ethiraj: Right. So this appears to be the first roadshow in some time, at least by the finance minister. The commerce minister, of course, has been going around.

I don't know if he's been doing it in similar formats. So what's your sense about all of this achieving in the larger context of attracting more investment and the perception of India from outside for foreign investors?

Shankkar Aiyar: Well, going old principle is that all decisions are predicated by choices. So Canada, for instance, in this case, is facing a lot of pressure from the United States on its trade deal. So Prime Minister Carney has been trying to expand his trade efforts to sort of tie up with different countries.

So he went to China, he came to India. So what India offers is scale and complexity in some senses, but also rapid growth rates. So what the point that all of these engagements are driving is that countries are desperate to get the investment that they need.

And in a landscape of rising cost of capital, which is what is happening if you see the long end of the bond, I think it is more important to get more savings from other countries into your country. Now, the commerce minister's engagements are largely about the trade deals. The finance minister's engagement makes it interesting because she is now meeting the Canadian finance minister, the Canadian industry minister and other officials in Toronto.

Toronto is the hub of financial market in Canada. So and later on, she's going to Chicago where probably she's going to meet people from the US market. So the feedback will be interesting.

The feedback will be useful. Whether they go back and are able to fix the problems at home is seriously a political question.

Govindraj Ethiraj: Right. That's a good note to end on Shankar for today. We will obviously continue this conversation.

Thank you so much for joining me.

Shankkar Aiyar: Thank you very much.

Gold Prices

Gold prices have risen again in the last three months and seem to be on a footing, even though they're not in the $5,000 per ounce range that people are getting used to. Spot gold, like we said, is about $4,611 per ounce, and gold-backed exchange-traded funds have attracted flows of close to 6.5 billion dollars last week, which was their largest weekly demand in ten months, according to the World Gold Council, with North American and Europe-listed funds leading the flow. So what are the forces that are driving gold prices up this time, and what's been happening in the last three months? I reached out to commodity and metals expert Ajay Kedia, and I began by asking him how he was seeing the gold market and the forces of demand and supply in recent months.

INTERVIEW TRANSCRIPT

Ajay Kedia: So, we can say 2026 has started with a very good bounce, but from there we have seen a solid correction. But August month we have seen market has gained by almost 17%. So, I think there are 2-3 triggers which are actually supporting the prices.

First of all, central bank buying, which is continuing to be there. Secondly, bond buying by US, which has also supported gold. Dollar index is below 99 as crude prices came down, which will actually support the inflation concern.

Meanwhile, there has been sign of ETF buying coming back in the market. Over and above, physical demand is expected to recover. Already we have seen multiple of exhibitions have been there in India.

Demand has slowly and steadily broke because of recent price fall.

Govindraj Ethiraj: Okay. So, let me pick on the 3 or 4 factors that you talked about. You also talked about central bank buying and ETF buying.

Now, how much is central bank buying today or has it been in the last few months relative to, let's say, what we saw last year?

Ajay Kedia: So, I think in central bank buying, China is one of the biggest buyers and since last 21 months, China is continuously buying. I think the numbers are around, on an average, we are, China is buying around, let's say, 150 tonnes nearby.

Govindraj Ethiraj: Okay. So, between central bank buying and non-central bank buying, including retail in countries like India, what would you say are the forces that have been keeping or driving prices up, particularly in the last 3-4 months?

Ajay Kedia: So, in last 3-4 months, as I have stated, first of all, no doubt the volatility was quite high because of crude oil prices and Middle East tension. Right now, as the Middle East tension is slightly coming down, we have seen crude prices came down, inflation concerns came down. Earlier, everyone was expecting that September there will be a rate hike but now we know rate hike or we can say unchanged.

That has supported very much. Central bank buying, ETF buying and festival mood has been started which is actually getting good support from physical market side.

Govindraj Ethiraj: And to what extent is the physical market now influencing the overall price trends? And when you say physical market, I'm assuming you mean jewellery market?

Ajay Kedia: Yeah, because last month I have went to IIJS where we have seen after the 2-3 years, jewellers from B2B point of view were actually getting good because of foot-stepping and looking to their statement and all. We see, no doubt, first quarter we have seen there is a rate duty hike to the 15%. So, it was been expected this will pinch but with all of a sudden price has fallen till June.

Prices were very much attractive that physical demand has re-improved now.

Govindraj Ethiraj: Right, and as you look ahead, what are the forces that you feel or factors that you feel will affect prices whichever way it goes?

Ajay Kedia: So, I think 2 years back whatever the factor up till now we have seen, that is reignited. First of all, 40 trillion debt from US which is ultimately going to support gold prices. Secondly, dollar index has went below 99 level mark, central bank, ETF and also one more thing is supply side is very restricted around 3500 to 3600 is the total supply we are getting where the demand if we include only India and China, 1800 tonnes is almost a demand is going there.

So, I think for next big rally interest rate cut scenario, then we can say central bank buying, de-dollarization and ETF buying. These will be the four key pillars which can support gold prices from here.

Govindraj Ethiraj: So, what's the sort of relationship between the dollar and gold in the near future as in are you saying that if dollar weakening and gold gaining and vice versa?

Ajay Kedia: So, generally the correlation between gold and dollar is inversely correlated, but whenever there is a geopolitical tension, we generally see gold and dollar both goes hand in hand. But now as ecosystem is been building, numbers are not quite good for dollar and we are expecting dollar to be downside towards 94-95 level and definitely that will again support gold from here because other factors will continue to support gold also and as inversely correlated when dollar is dropping, we can see gold prices moving towards 5100 level mark.

Govindraj Ethiraj: Got it. Ajay, thank you so much for joining me.

Ajay Kedia: Thank you Govind.

Indian refiners are scaling back buying of Russian crude

Indian refiners are scaling back buying of Russian crude from elevated levels as Ukrainian attacks have hurt flows from that country's top supplier, according to a Bloomberg report. Given the pressure on Moscow's crude exports, refiners have been looking for alternative oil supply sources, including West Africa and even the Americas, while also turning to Persian Gulf suppliers despite still restricted flows through the Strait of Hormuz because of the war, according to that report. This month, imports of Russian crude are expected to fall to about 2 million barrels a day from a high of about 2.8 million barrels in July. Waves of Ukrainian attacks on Russia's refiners and Black Sea ports have spurred local fuel shortages and prevented Russia from diverting crude into the export market, according to that Bloomberg report.

India Inc’s M&A Blitz

India Inc. has been accused of not spending much or enough on capital expenditure—one that it has not denied as such, at least in a general sense. But have stronger companies been focussing more on merger and acquisition deals to shore up capacity and thus expand into newer markets or products? The answer actually is yes, and a new report from CRISIL Ratings says as much. The report says that a 2x surge in M&A deals in the last decade has reflected—or is reflecting—India Inc.'s growth ambitions.

CRISIL, which typically looks at companies through the balance sheet and debt lens, says that three in four companies saw stable ratings or improved after deals, underscoring credit resilience. Moreover, it says mergers and acquisitions are rapidly evolving from an episodic growth lever into a core strategic tool for driving scale, capability, and market leadership across India Inc., which is evident in rising deal volumes with companies increasingly using acquisitions to scale faster into new markets and acquire capabilities that would take longer to build organically. It also said the momentum is broad-based, though shaped by sector-specific priorities and also reducing build times, like in cement and metals, from 4 to 6 years to 1 to 3 years.

The report said, "Our review of 100 large debt-funded deals shows two in three deals broadly met our expectations, and successful ones delivered 20 to 80 percent scale expansion within one to two years, widened geographic reach, and improved margins from the second year as synergies materialised." Not all was successful, of course: for the remaining one-third of acquisitions that fell short of intended business outcomes, the reasons ranged from integration challenges (which accounted for about half the cases) to regulatory delays and cross-border execution issues, each of which contributed about 20 percent. I reached out to Manish Gupta, Deputy Chief Ratings Officer for CRISIL, and I began by asking him what kind of deals he was seeing and how are they different from previous years.

INTERVIEW TRANSCRIPT

Manish Gupta: Basically, we did an analysis of around 600 odd deals, which are more than 500 crores and across 20 sectors. So the analysis here indicates that Indian corporates are increasingly using M&A for three dominant reasons, which is that firstly, it is faster route to scale. In sectors such as cement and metals, acquiring an existing business can actually enable faster expansion, maybe expansion in one to three years, compared to four to six years if you're building same capacity organically.

So in fact, some 50% of the acquisitions we analysed were towards this objective. The second driver that we saw was capability acquisition, which accounted for around 18% of the deals in our analysis. This is particularly evident in technology and healthcare where acquisitions can provide access to AI-led capabilities or specialised talent, global markets, speciality portfolios, CDMO platforms and medtech capabilities and all.

So this is the second key driver that we are seeing, which is leading to these acquisitions. The third driver is vertical integration, which accounted for around 14% of all the acquisitions that we saw. Here we saw that some companies are acquiring upstream assets to strengthen raw material security or increase operational stability and all.

So this is broadly that we're seeing as three reasons why these acquisitions are happening. What we also see that given that these strategic considerations which are there, plus there are healthier corporate balance sheets as well as we're aware and prove financial flexibilities, the M&A deal volumes itself has more than doubled since fiscal 2017. So that's like a one big observation that we had when we did this analysis.

Govindraj Ethiraj: Right. Like you said, I mean, at one side, obviously it represents strong balance sheets and the ability, obviously, and the propensity to expand through M&As. On the other hand, does it also reflect weakness in parts of the economy and in some of those sectors that you're talking about?

Manish Gupta: No, it's not about the weaknesses, but it's more that, you know, companies are still evaluating whether it is better for them to really go all hog on organic expansions. So we are seeing barring two sectors like cement and steel, they are sectors where still people are doing more organic APEX, but in others, people are still a bit wary. And this could be for several reasons.

See, one, we are seeing that the utilisation levels are pretty strong, some 74, 75% capacity utilisation level is still there. Normally we see that APEX begins to happen at these levels, but currently for reasons related to maybe the global uncertainties, demand related uncertainties, or sometimes it is also to do with the ground level challenges in bringing up greenfield capacity. So that's also forming a reason why people are holding back in terms of doing organic capacity expansions.

Govindraj Ethiraj: Right, and you're also saying from your study that all of this has contributed to faster growth for your sample set. And part of it I'm assuming is logical because you're adding top line, but are there any other reasons? Yeah, I mean, faster growth is one aspect.

Manish Gupta: Essentially our analysis is also trying to cover up aspects related to resilience that we are seeing and incorporates. And while CAPEX is not happening, but this is another route to growth, which is there, it's not a substitute. So that's very clearly there.

But I mean, people are doing these acquisitions for scale or for reasons related to getting some new technologies, specialised capabilities and differentiated products as well.

Govindraj Ethiraj: So some of these are the reasons which our companies are using. So, I mean, there has been a lot of discussion or continuing discussion on how India Inc is not spending enough in terms of capacity expansion. But what you're saying, at least via the study, is that they may not be doing that, but what they're doing instead is actually M&A, which is perhaps at least for one set of companies taking us to the same objective.

Manish Gupta: Yes, that's true. In fact, some of the sectors that we notice like in consumer goods and retail, here there is a drive towards premiumization and digital commerce as well. And that's becoming a central theme.

So nearly two thirds of acquisitions in the FMCG space over the last five years have been in the D2C space. So established companies are actually using acquisitions to enter growing categories by adding some premium or health-focused products or convenience or some digitally native brands as well to their portfolio.

Govindraj Ethiraj: So that's another way to really grow and be relevant in the fast changing environment. And that's an interesting trend as well. And we've seen that in some of our own conversations on the show.

Any other trends that have caught your eye, Manish?

Manish Gupta: I'll tell you what, like when we were seeing acquisitions some 20 years back, so there we were seeing this from a credit angle when an acquisition used to happen, there was always a credit pressure and there was a huge amount of debt which also used to come and hence increase the risk that we were seeing. But this time around, when we are seeing of lately these acquisitions, one, the amount of debt being taken for the acquisition has come down. So earlier, when I'm saying earlier, I'm saying in the period of 2008 to 2012 or so, the amount of debt used to be somewhere close to 45% of the deal value.

That has now come down to some 30%. So which is a substantial change that we believe is one of the reasons that we are no longer seeing downgrades happening as much. In fact, I mean, in our analysis, some 75% of the deals that we saw were either reaffirmed or upgraded post acquisition, which is a very differentiated and changed kind of a trend that we're seeing.

We also saw that if you look at it from a point of view of gaining synergies or reaching a level of integration that you desired post acquisition, a good proportion of companies were able to do that and using that were able to offset the temporary impact of higher leverage during these acquisitions as well. In fact, 60% of the companies that we saw were able to de-lever themselves in the desired and designated time frame, which was like two to three years post acquisition.

Govindraj Ethiraj: If you're saying about 30% or so was the debt level for most of these acquisitions. So where did the 70% come from or what was the structure?

Manish Gupta: So 70% is coming in more from also they've become quite robust over there. So available free cash flows were high. Equity raises had gone up as well.

So significant amount of equity raises are happening. In fact, over the last five years, the amount of equity raises more than four, four and a half times than what happened in the previous prior five years as well. Thirdly, I would say that, you know, capital markets have also been quite benevolent as well.

And hence, people have been able to reduce sales stakes and raise capital at a pretty decent value and make funds available for doing these acquisitions.

Govindraj Ethiraj: Manish, it's been a pleasure. Thank you so much for joining me.

Manish Gupta: Thank you, Govind. It's a pleasure.

Meta To Make Changes To Its Platforms to Protect Children

Meta Platforms has agreed to pay a maximum of 16.6—or close to 17—billion dollars and make major changes to Facebook and Instagram to resolve claims by states across the United States that the company designed those platforms to addict children, mislead consumers about their safety, and improperly collected children's personal data. The settlement resolves claims brought by 29 U.S. states and will end a federal trial that has been one of the highest-profile tests yet of allegations that social media companies harmed young users, according to a Reuters report.