Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:53) Foreign Investors Pump in $5 billion in December
- (03:29) High costs, delays stare at Indian shippers as violence grips Suez Canal
- (14:20) Gold looks very promising suddenly, should you invest now?
- (19:15) High passenger load factors will drive higher profits for Indian airlines, Ryan Air’s CEO lines up for 100 million pound bonus
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Markets And Oil
Even the greatest mountain climbers pause for breath, as must the Sensex and the Nifty as it did yesterday.
After all, the indices had gained for seven straight weekly gains. The BSE Sensex closed at 71,315 levels, down 169 points while the Nifty50 ended at 21,419, down 38 points.
But look at the bright side.
The Nifty and Sensex have gained about 6.5% so far this month and are set for their best monthly performance in 2023, with the Nifty closing at a record high in nine of the previous 11 sessions, Reuters has pointed out.
Both domestic and global factors are presently looking good, including of course foreign flows.
FPIs Hit $5 Billion Already
Foreign portfolio investors (FPI) were major buyers of Indian equities in the first half of December, making the highest-ever purchases in a fortnight, National Securities Depository data showed.
The FPI inflows worth ($5.15 billion) in the first half of December were close to the purchases made in all of July 2023, and could reach the highest level since August 2022 if the trend holds for the rest of the month, the Economic Times reported.
FPIs had turned net buyers in November, after selling in the previous two months.
The reasons are both domestic and international as I alluded to earlier. Internationally, expectation of lower interest rates means capital is flowing out and into potentially more rewarding markets, like India.
Domestically, there is an expectation of political continuity and there are strong flows into mutual funds and stocks from investors.
"India's economic outlook is robust with close to 7% multi-year GDP growth likely," said Jefferies analysts in a note dated Dec. 15, with the brokerage expecting earnings growth of close to 15% for Nifty 50-listed companies in fiscal 2025, the ET quoted.
FPI inflows in fiscal 2024 so far stood at 1.74 trillion rupees as of Dec. 15, and were on course for the highest inflows in a fiscal year since 2021.
Our energy segment is up, supported by IndiaEnergyWeek.
Oil rose following its first weekly gain since late October as major shipping lines suspended transit through the Red Sea into the Suez Canal.
Global benchmark Brent traded near $77 a barrel after gaining 0.9% last week to snap a seven-week streak of declines, Bloomberg reported, adding that the Egypt’s Suez Canal Authority said it’s “closely following” tensions in the Red Sea after the US said it shot down 14 drones launched from Iran-backed Houthi-controlled areas of Yemen.
Major shippers MSC Mediterranean Shipping Co. and CMA CGM SA, Maersk and Hapag Lloyd have all said they will not be sending their vessels through the choke point in the face of rising threats, while Maersk Tankers A/S said it would insist it's vessels have the option to avoid the route.
Houthi militants have been attacking more and more merchant ships in the Red Sea — especially vessels that they claim are connected to Israel — in response to the war in Gaza.
Before I come to the impact on shipping, crude has lost about 20% from its high in late September and is down 10% for 2023.
While OPEC members have been threatening to cut output to keep prices high, there does not seem to be or is limited belief in how much of that threat would be carried out.
Meanwhile, US shale supply has beat analyst expectations.
Bloomberg is reporting that Goldman Sachs Group Inc which usually pitches for higher oil prices has cut its forecast range for Brent in 2024 by $10 to $70-$90 a barrel in a report dated Dec. 17.
That came as it boosted its outlook for US oil supply growth next year to 0.9 million barrels a day, from 0.5 million.
The energy segment was brought to you by India energy week starting from February 6. Details at www.indiaenergyweek.com
Meanwhile, what should India make of the tensions around the Suez Canal. I reached out to Rakesh Singh, Managing Director of A-Sree Shipping and Secretary of the ICC SHipping Association and began by asking him first about the impact on global trade with the major lines like Hapag Lloyd, MSC and Maersk suspending movement.
Rupee Still Strong
The rupee continues to rule strong though it dropped back below Rs 83 after an early battle during yesterday’s trading day.
It settled at 83.05 after opening strong at 82.97.
Last week, the prognosis was looking much weaker and it might still go there but the jump in FII flows is clearly helping and possibly to some extent halting a steady slide.
Sovereign Gold Bonds Here We Come
Gold prices have been rising, up almost 13%, beating most classes and coming close to the stock markets were it not for what is now being referred to as the Santa Claus rally of the last month.
Should you be investing in gold then, if so should you do it for capital appreciation or a hedge against all things going wrong, as people have done for a century or more.
The Government’s Sovereign Gold Bond (SGB) Scheme Series III for the fiscal year 2023-2024 opened for subscription yesterday, that’s December 18 and will close on December 22.
The Reserve Bank of India has fixed the issue price at Rs 6,199 per gram.
So the questions are two-fold, one is where does gold fit today, after all this appreciation in a portfolio and where does gold fit in general and what is the prognosis ahead.
I reached out to veteran financial advisor P V Subramanyam,CEO of Subramoney.com and began by asking him how he was rating gold right now.
Ryan Air Record
The Indian aviation industry is set for a strong Q3 on the basis of rising passenger load factors.
Thanks in turn to over a 100 aircraft being grounded of course.
A report from ICICI Securities says the combination of PLFs trending higher than 85% and lowering crude is setting the stage for a strong Q3 for Indian airlines.
And of course a daily domestic passenger count of ~440k seen in Dec '23 till date.
Most airline passenger loads are now close to or just over 90% which of course is as happy as happy times go.
Elsewhere, Ryanair Holdings Plc Chief Executive Officer Michael O’Leary could secure a €100 million ($109 million) bonus if the low-cost airline’s shares keep rising, the Financial Times reported.
According to a 2019 bonus plan, O’Leary, 62, stands to earn share options valued at approximately €100 million if the Irish company’s shares maintain a price of 21 euros for 28 consecutive days, the newspaper said.
The company’s shares, which have gained more than 50% this year, have yet to reach that critical level.
Back home, Indigo with a lion’s share of the Indian market at around 61% is also seeing a solid run in the bourses.
RyanAir is low cost and so is Indigo. There is some takeaway in that obviously.
Big tech stocks reclaimed their position as the market’s leaders this year. Just how far ahead of the pack have they run?
The WSJ says that collectively, the stocks known as the Magnificent Seven—Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta Platforms, have jumped 75% in 2023, leaving the other 493 companies in the S&P 500 in their dust. (Those have risen a more modest 12%, while the index as a whole is up 23%.)
The Magnificent Seven stocks have swelled to represent about 30% of the S&P 500’s market value, according to Goldman Sachs Global Investment Research. That is approaching the highest-ever share for any seven stocks.
“It’s a mind-blowing number to me when I think about an index that’s supposed to represent such a broad group of companies,” said Ann Miletti, head of active equity at Allspring Global Investments, of the wide outperformance gap.
The influence of the big tech stocks is massive on a global scale, too. Within the MSCI All Country World Index—a benchmark that claims to cover about 85% of the global investable equity market—the combined weighting of the Magnificent Seven is larger than that of all of the stocks from Japan, France, China and the U.K.
Of course the problem is that when just a few stocks are responsible for most of the market’s gains, it becomes more vulnerable to a downturn if a few heavyweights fall. Like it happened last year.
The Magnificent Seven finished 2022 down 40%, losing $4.7 trillion in combined market value, whereas the remaining stocks in the S&P 500 dropped 12%.
And now it has turned again.