On Episode 836 of The Core Report, financial journalist Govindraj Ethiraj talks to Bhavdeep Bhatt, CEO at Northern Arc Investment Managers as well as Nikhil Sethi, National Leader Consumer Goods and Co-Lead Customer & Operations at KPMG in India.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Fresh misdirection from the United States on a possible end to the war.

(05:40) Former BA and IATA CEO Willie Walsh to join Indigo as CEO.

(06:55) India real GDP could contract by 1%, says EY.

(07:22) Why Indian credit markets are safer and the overall investing landscape.

(16:29) 96% of Indian shoppers research online before purchase, while 46% check store inventory before visiting

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.

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Good morning, it's Wednesday, the 1st of April, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. And yes, it is a very happy new financial year to you, and I hope this is a better one than the previous one, which has obviously ended quite badly.

Our top stories and themes…

Fresh misdirection from the United States on a possible end to the war

Former British Airways and IATA CEO Willie Walsh to join Indigo as CEO

India's real GDP could contract by 1%, says Ernst & Young

why Indian credit markets are safer and the overall investing landscape

96% of Indian shoppers research online before purchase, while 46% check store inventory before visiting—what should companies do?

Markets, Gold, Oil and Indigo

Indian markets were closed yesterday. It's also happened, or seems to happen, that they mostly close when US President Donald Trump releases his knock-up-the-market statements. The US now has troops on ground who are presumably raring to go. The arrival of 2,500 Marines and another 2,500 sailors is keeping the number of American troops in the Mideast region at over 50,000—roughly 10,000 more than usual—as the United States decides on its next step in the month-old war, according to the New York Times, adding that it was still unclear just what the Marines from the 31st Marine Expeditionary Unit will be charged with.

Trump's latest statement on Tuesday morning, Washington time, appears to ask the Europeans to free up the state of Hormuz if they so wish, and hinting that America has done its job. His Secretary of Defence later said, and quite predictably, that all options were still on the table, including boots on the ground. So nothing new in the continuing attempts to sow confusion or misdirect, as we've seen in the past.

Meanwhile, amongst perhaps the only issues that does concern the United States, in the United States, which could affect the continuance of US active presence in West Asia: US retail gasoline prices have crossed $4 a gallon for the first time since August 2022.

Elsewhere, Italy denied a US military aircraft bound for the Middle East permission to land at a base in Sicily, according to Bloomberg, adding the move follows Spain's decision to close its airspace to US war-related flights. Beijing has acknowledged for the first time since the war started that Chinese vessels have transited the state of Hormuz, while also mentioning coordination involved in making those crossings happen, according to Bloomberg once again, which also added that Iran hit a Kuwaiti oil tanker in Dubai's Port Anchorage, with authorities saying later that the situation was contained with no oil spill or injury.

On Wall Street, it was supposed to be a banner year, and now investors are just hoping to avoid a global recession triggered by a historic run-up in energy prices, according to the Trump administration-friendly Wall Street Journal, which of course does not mention that all of this was caused by the US attacking Iran along with Israel.

US stocks are now set to deliver their worst quarter in nearly four years. The tech-heavy Nasdaq composite went into correction territory on the 26th of March, which means it had fallen 10% below its recent highs, and on the 27th, the Dow Jones industrial average also joined it.

All of this, the Wall Street Journal laments, is a sharp contrast to December, when economic growth was accelerating, the Federal Reserve appeared poised to make further interest rate cuts, and markets had moved past the uncertainty created by the tariff wars. Together, the trends pointed to a potential for double-digit returns, and investors came into 2026 confident the rally was about to sweep up many of the stocks that sat out the rise of big tech, NVIDIA, and the artificial intelligence boom. Amazing, isn't it?

Meanwhile, aluminium prices closed in on levels not seen since 2022 following Iranian attacks on two Middle Eastern producers over the weekend, heightening fears of a supply crisis for the industry, according to CNBC. Futures price on the London Metal Exchange jumped about five and a half percent to touch about $3,492 per tonne, and pulled back on Monday to float around $3,381 per tonne. Now, aluminium prices have gone up about 10% in the last month, since February 28th—that is, though it fell a little last week. The producers who were attacked were Emirates Global Aluminium and Aluminium Bahrain.

Gold rose on Tuesday but was also set for its biggest monthly slump in nearly two decades, or 20 years, as fading rate cut expectations, rising energy costs, and a stronger dollar due to the Iran war weighed on demand, according to Reuters, which added that spot gold rose to about $4,559 per ounce on Tuesday. And it has now declined—or rather, bullion has now declined—about 13% this month, putting it on track for its steepest fall since October 2008. Its record high was at about $5,594 on the 29th of January, and we are now at $4,559, just to revisit that figure.

On the oil front, India's diesel exports to Southeast Asia have hit the highest in more than seven years in March, according to shipping data quoted by Reuters, as traders pivoted supply to cover short position and refiners cashed in on higher profits in Asia thanks to this ongoing war. The surge in exports could boost spot sale margins for Indian refiners who've purchased large volumes of prompt Russian crude to replace Middle East supply disrupted by the war, according to Reuters.

Now, Brent futures were heading for their largest monthly gain in volatile trading on Tuesday and were up around $114 per barrel, or just under $115 a barrel, according to Reuters.

Among other news, and interesting ones, that Indigo has named Willie Walsh—the high-profile aviation personality who we quote frequently here as CEO of the International Air Transport Association, or IATA—as chief executive. Walsh, who is 64 years, was earlier CEO of British Airways and is expected to join Indigo by August.

Speaking of IATA, its latest report for February, out last evening, says total demand measured in revenue passengers kilometres was up 6.1 percent compared to February 2025. Total capacity measured in available seat kilometres increased 5.6 percent, and load factor was at 81.4 percent, which is the highest February figure on record. Asia Pacific airlines led the rise, as they usually do, with an 8.6 percent year-on-year increase in demand and a load factor of 86.6 percent.

Cargo, on the other hand, grew faster, which is usually the case. Total demand measured in cargo tonne kilometres, or CTK, rose 11.2 percent compared to February 2025 levels.

Now, of course, we know or can see that the month of March will see sharp falls in all these numbers, particularly across Asia and West Asia, as we saw thousands of flights being cancelled or disrupted—and that disruption continues to this day.

Indian GDP

India's real GDP growth for the next fiscal could erode by about one percentage point, while retail inflation could rise by about 1.5 percentage points from their baseline estimates if the West Asia conflict persists through the next fiscal, according to an Ernst & Young report. The EY Economy Watch report said that several sectors, including employment-intensive sectors like textiles, paints, chemicals, fertilisers, cement, and tyres, could be directly impacted.

We spoke of credit markets yesterday in the context of the United States. What is the overall lending and investing climate looking like from a non-bank and investing finance companies perspective? Northern Arc is a non-deposit-taking NBFC offering a platform that connects underserved borrowers with investors—that's banks, financial institutions—through securitisation, debt structuring, and direct lending.

I reached out to its CEO, Bhavdeep Bhatt, who looks after the fund management part, and began by asking him what's been changing in recent months, apart from, of course, the war that started on the 28th of February, and what should we be thinking about when it comes to flows.

INTERVIEW TRANSCRIPT

Bhavdeep Bhatt: So I think what has happened over the last 18 months or so, for example, on the flows, FII flows, for example, we have seen about $42-$43 billion of outflow since peak of markets, equity markets in September 2024. FII flows anyways had been kind of not so in a positive zone. In fact, one of the worst years that we have seen, 18 months we have seen in terms of net flows.

So that was anyways happening. On the other side, I think particularly with this war situation kind of panning out in last one month or so, we have seen three key drivers of financial markets, whether it's the economic prospects, liquidity, as well as the sentiment. All the three broad drivers have got impacted very badly, particularly with oil being at the epicentre in some way from the India standpoint, and that affecting multiple macro parameters, whether it's CPI, for example, or because of which the trajectory of interest rates or fiscal balance, for example, and multiple other factors, whether it's the energy sensitive sectors, et cetera.

So I think the entire economic landscape has sort of undergone a little bit of change, and that macro mix has sort of present in last one month particularly. Second is liquidity, we just spoke about on that side. And third is the sentiment, and there definitely is a risk of environment as we speak right now, because almost all markets, whether it's equity markets, bond markets, and to start with on a one month basis, if you see with the gold markets, I think there is sort of risk of that we are seeing across financial markets.

I think the macro mix has changed, broadly speaking, and it will depend on when and how does the war sort of end. But yeah, I mean, at this point in time, the macro mix looks concerning.

Govindraj Ethiraj: Sanyam Bhutani Right. And, you know, we've also been talking or looking at what's happening in the private credit markets in the US and we've seen redemptions and then attempts to block those redemptions. And that obviously creates some sort of concern, maybe not a panic right now, but definitely some concerns because some big names are involved.

What does that phenomenon represent? And should we be sitting in India be even concerned about it?

Bhavdeep Bhatt: Rohan Patel So this is a very interesting question. And it's very topical point actually. But what is really important is to really understand the distinction between the basic nature of private credit market in the US and where are we placed in terms of Indian private credit markets.

So fundamentally, if you just look at the size of the market is very different, like, if I'm not mistaken, about 45% plus of credit in the US get generated through private credit as a channel versus in India, it's about six, seven percent. So one is the evolution and the size itself is very different. And number two is even the nature of the way we private credit is managed, productized and delivered in India is very different compared to the US.

In US market, for example, it's very covenant like industry. In our case, you find a lot of covenants across, you know, three parameters, whether it's KRL related, balance sheet related or the cash flow related. So well covenantized sort of underwritings that happen in India.

Number two is the leverage, which is another very important factor going because in US if you see there are, it's very usual to see leverage on the fund product itself. Whereas in case of India, because of the regulatory oversight and very proactive sort of regulatory measures, we don't have that kind of phenomenon in India. So that significantly reduces sort of the risk element in the product.

And third, which is probably the most important element is the liquidity. I think in US what we have seen with some of the large names kind of running into some sort of liquidity freeze kind of situation. I think what has happened in US post GFC, we have seen almost a one way growth in terms of private credit industry.

In India, we had our brush with crisis in ILFS post COVID situation where the retail platform for credit, like mutual fund industry, for example, kind of ran into that ALM mismatch kind of situation. And post which the entire industry sort of moved from mutual fund kind of open ended structure where investors have daily redemption opportunity, but underlying investments are like in a liquid two, three year duration securities. So I think that entire industry has moved to more of AIF kind of structure where there is a close ended product structure.

So you don't see that ALM mismatch in India. So to that extent, that liquidity creating credit crisis is no more a phenomenon in India. So across the elements, whether it's covenant, leverage or liquidity, I think our markets are much better place compared to US market.

Govindraj Ethiraj: Interesting. And as you look ahead now, given where we are, where obviously there's been a lot of sell off, whether it's foreign portfolio investors or other institutional non mutual fund institutional investors in India, how are you seeing people allocating or reallocating their portfolios and funds in coming months?

Bhavdeep Bhatt: Very interesting. And I think a lot of smart money would be sort of waiting on to see how they can really capture the opportunity for outsized returns. We all know that wars end right in this kind of accidental situations.

Of course, they kind of leave some impact. That impact in terms of dislocated prices, et cetera, mean good investment opportunity for outsized returns for smart money. And I believe that because of the maybe the information of flow that's happening, you know, and current environment, I think the corrections are sharper and short lived.

So depending on how the war situation kind of evolves over the next few weeks time. But my sense is that over the next few weeks or months, there will be great opportunity both for equity investors and fixed income investors to really make outsized returns if they identify the right sectors and the right investment opportunities in India. Because even on the credit side, for example, of course, there will be a little bit of credit performance getting impacted.

But the need for credit, the supply and demand of credit is not going to get impacted in a country like ours, which is opportunity rich, but capital stout in that sense. Right. I think the demand for credit will keep going.

And with more and more HNIs wanting to kind of allocate and in a very balanced way, their portfolio, there will be demand for high yield products as well. So I think the credit market also, my sense is will give amazing opportunity over the next few months in terms of making some sort of outsized returns. So both markets look very well placed now.

There will be a renewed sort of a sense of urgency for HNIs to kind of have more balanced portfolio, not only across asset classes, but across geographies as well. I think there is always a native bias and people are invested significantly more in India. I think the third dimension besides equity and debt will be the need or the appetite for diversification across geographies that will sort of show up over the next few months, as I see it.

Govindraj Ethiraj: Right. Last question. So from your own sort of investing strategy outlook, how would things have changed between, let's say, February 1st week and April 1st week, if they've changed?

Bhavdeep Bhatt: Yes, of course, they've changed. Good part is that the segment that is presenting, for example, with the financial services industry. So NBFCs over the last two years have come from a very bad cycle and they are much better capitalised right now than what they were seeing post-Russia-Ukraine crisis.

So to that extent, the industry is better placed. So to my mind, they have better strength in terms of their balance sheet dynamics, in terms of withstanding this particular crisis. Having said that, there are other sectors like food and beverages, you look at transportation, you look at tourism.

There are certain sectors which will be more sensitive to this current crisis and could be badly impacted. For example, some of our borrowers, for example, are also kind of dealing with payment banks in India. And if you look at the early kind of signs or more frequent data analysis, of course, there is an impact in terms of the collections by the vendors at the margin.

So you are seeing that early sign of some sort of weakness on that side. So one has to be really more circumspect in terms of the way they underwrite, etc. I think underwriters with strong track record and domain expert will sort of benefit across the credit spectrum is how I would.

So yes, one will be a little more cautious, will be more kind of diligent about the way one underwrites. So when I see the financial markets, there is a risk of a little bit of that or more circumspect underwriting from managers like us as well. So of course, we have become a little more conservative on that side at the margin and we'll kind of keep evaluating opportunities.

But at the same time, you know, as much as there are challenges in certain sectors, there will be pockets of opportunities. As I mentioned, FI itself, we find great opportunity to kind of invest in multiple sectors, subsectors of FI, whether it's MSME driven, for example, or affordable housing or consumer finance companies, etc. So there are enough pockets of opportunities also which will show up in this dislocation.

So we will be kind of looking for those opportunities and be more aware and the circumspect of those challenging situations in terms of the final borrowers on that side. So yeah, I think that's what has changed over the last one month as the situation has unfolded.

Govindraj Ethiraj: All right, Bhavdeep, thank you so much for joining me.

Bhavdeep Bhatt: Thank you, Govind.

Consumer Trends

Expanding the consumer market is getting tougher, with private consumption growth having slowed in recent years. So what are some of the changes in retail behaviour which is causing consumer-facing companies to change or rework their strategies?

Consulting firm KPMG recently put out a report called Winning India's Consumer Decade: The Precision-Led GTM Blueprint for CXOs. The report highlights how India's consumer economy has reached a significant inflexion point and what that means for brands navigating rapid shifts in consumer behaviour, retail channels, and digital commerce.

It points out that 96% of India's shoppers research online before purchase, while 46% check store inventory before visiting. So the new approach is, or will include, micro-market strategies and precision targeting.

So what does all of this mean? I reached out to Nikhil Sethi, national leader, consumer goods, and co-lead, customer and operations at KPMG, and I began by asking him to talk about what was changing from a macro market and demand perspective.

INTERVIEW TRANSCRIPT

Nikhil Sethi: So if you see Govind, over a period of time, India has always been a high growth consumption market, but especially if you see post-COVID, growth seems to be slowing down. It's slowing down on two accounts. There is obviously the macro, where there are enough reports which seem to believe that overall consumption is slowing down a little bit or the growth of consumption isn't as much as it used to be, but also the competitiveness has increased a lot.

Therefore, at every point of sale, the competition is harder and I would actually say that the market has transitioned from an everybody grows game to I grow by gaining market share. Now in these specific moments, because competition is higher and the consumer itself is getting a lot more fragmented, what do I mean by fragmented? A consumer today is operating in multiple channels.

A consumer today is getting signals from multiple channels. It is possible today I get excited about a brand by seeing an ad on Instagram. I go to Amazon and check out its price.

I go to the nearby store and actually touch and feel that particular brand, but it may or may not be available and I come home and I buy it on Blinkit because I want it here and now. It is the same journey that has gone through multiple channels and historically where companies and many companies today, even though we seem to think otherwise, tend to operate in channel silos. I think what the report is saying is that we need to start looking at demand and sales at a moment where it happens and therefore how can a company orchestrate either how it is organised or the demand signals in the data that it has in order to have a precise response, which is why we've called it precision led DTM.

Precise response in order to make that sale happen.

Govindraj Ethiraj: Right. And your point, if I understood correctly, is that consumer good companies or FMCG companies are traditionally tuned to this way of working because they have the distribution, they have the channels, they've been trying to nurture it, whereas it's the non-FMCG companies whose brands and products are still relevant in the market and yet have to find a place, have to focus more on this sort of response.

Nikhil Sethi: So I think it's a bit of both. So when you look at the latter, which is the non-FMCG companies, so to say, their go-to markets have traditionally been not so evolved, but they're actually very complicated. For example, if you're building a bathroom in your house today, you would make a choice of the sanitary ware that you want, either by looking at an ad which you've seen on a cricket match or by looking at an experience centre or actually being influenced by an architect or your contractor in order to what to do.

You might go to an experience centre to look at what products that they have, but ultimately the sale happens via dealer distributor who's largely pushing their own agenda. The movement of consumption for you is not orchestrated as a singular experience and therefore many of us, when we buy a lot of these traditional products, don't come away with good experiences. So definitely there is a movement for companies to orchestrate experiences well in order to win share of wallet.

When it comes to companies like FMCGs, even though the products are standard and that's the way the model has always been, there is a lot of convergence happening across channels today. So in the same colonies or in the areas where we live, depending on the movement that you have, you could walk down to your traditional kirana to pick up something, you could walk into a modern trade store to discover and figure out what are the new brands which are there, or you could buy the same brand on quick commerce because you want it here and now, or you could be an amazon customer or an e-commerce customer and get this at a later delivery. So the behaviour of an individual depends on the mission that the individual has and therefore even for an industry like the FMCG, orchestrating what we're talking to people, what products we're giving to them, what we are pricing is very very important in order to win in the market.

Govindraj Ethiraj:

Right, and your report also says that 96% of shoppers are now researching online before purchase and 46% even check store inventory. I don't know what the size of this is and what the estimation of the size of the market itself is or the size of the consuming base is, but what should companies or brands be doing in response to this?

Nikhil Sethi: So what a company should be doing is understanding that the entire purchase journey is starting from discovery on a digital medium and ending with the consumption actually happening with you. And there are many many nodes where all of this is happening. Your digital discovery could be on blogs that you read, on ads that you see, on videos that you follow, influencers that you follow and therefore there are multiple sources of discovery and as you sort of move along that funnel from awareness to discovery to intent to actual purchase, how does a company orchestrate the promise that they're giving to a customer across these multiple channels either on the marketing side or on the actual sales side?

Govindraj Ethiraj: Okay, so you've also talked about precision and in the context of targeting or marketing. Can you give us an example and how that would work?

Nikhil Sethi: So for example today if you live in a part of Bombay that you are, all of the places that we live in today have mixed retail footprints. You have kiranas, you have modern trade, you have e-commerce, you have quick commerce. The signals that a company is getting today across all of these are manifold.

Right, so one way to think about it is saying am I able to take all the signals that I have and mash them together in order to create a very unique fingerprint if I may say on what is the demand pattern of a specific micro market. Once that I understand what the demand pattern of the micro market is, can I ensure across all of my channels that the product that has a likely demand in that micro market is available now across all the channels. And then depending on the behaviour that consumers have in particular channels.

For example e-commerce you might have a more discount led behaviour. Quick commerce you might have a more emergency of need behaviour. In a kirana store it is probably I know the brand and I want to pick it up because discoverability is difficult.

Whereas in the modern trade store you might want to walk the aisles, browse a product and discover something new. How do you then tailor your playbooks whether it's promotions, whether it is your in-store advertising in order to do that to basically bring the sale home. So the actions that a company is taking is actually very very precise in terms of micro market cross product, cross time, cross consumer segment, cross specific store.

And today there is an ability for us to do that. Why do I say we have the ability to do that? Because this demand signals are available and the technology in order to plan a granularity and tell our sales team what to execute a granularity exist with the AI systems that we have today.

Govindraj Ethiraj: Right and last question on since you mentioned AI. So tell us about the role of AI on both sides. I mean how consumers are and could be using it increasingly to determine their own needs and choices.

On the other side how could companies be using it to respond to this.

Nikhil Sethi: So let me start from the company's time point first. I mean as a consultant who obviously is talking to many clients in order to say how do you sort of bring AI in. I think the big value that we've seen from AI is that it helps a deal with a large amount of granularity and it helps unlike what traditional MI systems did take decisions on your behalf.

Right so granularity of information just in the examples that I spoke to you is you suddenly want to look at data or data signals at a micro market level which you earlier did not because you looked at it at a city level or broke the city into you know fewer cohorts and sort of looked at it. You looked at at aggregated channel levels but you did not look at data at a store level. We always wanted to do that.

The intuitive sense has always existed with sales teams in terms of what to do but suddenly the ability to look at granular data now exists because of AI. The decisions that companies take often a large number of them are deterministic decisions. Right there isn't stock there let me allocate some stock there.

I sense a demand in a certain place let me send something out there. A particular store is likely to sell more with a greater discount. Let me create a promotion for that particular store that is possible to do.

AI again enables companies to take many of these decisions at scale which otherwise are blocked with sort of if they're all human-led decisions. So as long as AI is configured that way today I think the technology exists in order to help companies make these decisions. From a consumer standpoint AI for discoverability I haven't seen very many use cases those who are sort of a little ahead in the AI adoption journey can of course use AI, open their agents, help for discoverability of brands, prices so on and so forth.

But I don't think that's a mainstream concept yet.

Govindraj Ethiraj: All right Nikhil thank you so much for joining me.

Nikhil Sethi: Thank you for having us.