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Global Stock Markets Pause For Breath, Could Lead India Recovery

Stocks and US futures climbed on Thursday as traders appeared to have come to terms that interest rate cuts may be delayed beyond the first quarter with Europe specifically hinting at a mid year move

By Govindraj Ethiraj
New Update
Global Stock Markets
On today’s episode, financial journalist Govindraj Ethiraj talks to Gaurang Shah, Senior VP at Geojit Securities as well as Ashok K Bhattacharya, Editorial Director at Business Standard.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:00) Global stock markets pause for breath, could lead India recovery
  • (10:17) Bets now on post-elections growth, in loans and equities. 
  • (12:25) Worldwide power generation from coal hits new high in 2023
  • (14:52) 25 crore people in India came out of multidimensional poverty in 9 years
  • (22:40) Aviation industry focusses on big airplane orders, including fresh ones, as it tries to put the mayhem of last week behind

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 Pause, Will They Lead A Recovery

Stocks and US futures climbed on Thursday as traders appeared to have come to terms that interest rate cuts may be delayed beyond the first quarter with Europe specifically hinting at a mid year move.

In the US, the focus is on chipmakers who gained in US premarket trading after Taiwan Semiconductor Manufacturing Co., the main supplier to Apple Inc. and Nvidia Inc., said it expects a return to solid growth this quarter, Bloomberg reported. 

Microchip Technology Inc., Advanced Micro Devices Inc. and Applied Materials Inc. added more than 2% each. Apple climbed 1.7%, while Nvidia rose 1.6%.

Boeing Co. gained after winning an order for 150 of its troubled 737 Max jets from, well, India’s Akasa Airlines and more of that shortly.

Signs that European policy makers are converging around a June rate reduction helped calm markets, along with indications that Chinese state funds are coming to the rescue of equities battered by a flagging economy, said Bloomberg.

The BSE Sensex declined 314 points, or 0.44 per cent, to end at 71,187 levels, while the Nifty50 ended at 21,462, down 110 points or 0.5 per cent.

HDFC Bank fell another 3 per cent after falling over 8 per cent Wednesday.

There is a fair bit of post mortem now going on about why HDFC Bank stocks are falling like this, including whether the management did not communicate its results well enough.

The worry is obviously because many institutional investors have a high exposure to HDFC Bank and it in turn has a considerable weightage on the BSE Sensex..so if HDFC Bank falls, the whole market falls.

The rupee moved in a tight range for most of Thursday as Asian currencies overall were stronger, closing at Rs 83.12 against the U.S. dollar, very slightly higher than the previous session. 

I reached out to Gaurang Shah, Sr VP of Geojit Securities to get a sense on what triggers were really driving the markets.


Asia’s New Favourite Stock Market Is..

In a fresh sign of shifting capital flows and to some extent a demonstration of how quickly market fortunes can change, Japan’s equities are rapidly gaining on their losses to Chinese stocks.

The gap between the market capitalization of mainland Chinese stocks and Japanese shares has shrunk to $2.55 trillion, the least since July 2020, data compiled by Bloomberg show. 

The last time Japan commanded a higher value than China was in early 2019.

This of course is a good reminder that Japan was a bigger stockmarket not so long ago and how global investors are weighing options at this point.

While investors are buying Japan, they are dumping  Chinese stocks with China’s CSI 300 Index now at its lowest level since January 2019. 

Meanwhile, as we mentioned a few days ago as well, Japan’s indices, the Nikkei 225 and Topix gauges are at their highest levels in 34 years this week. 

Tokyo stock exchange is now Asia’s biggest equity market and Japanese indices have been the world’s best-performing major national equity indexes in the past 12 months, with each gaining more than 25%, says Bloomberg.

Post Polls

After a series of bullish reports, each one more than the other, in the last 6 months, investment bankers are now focussing on post poll gains.

India may see accelerated foreign inflows into its $4.4 trillion stock market once the national elections are over, according to a Goldman Sachs Group Inc. strategist, reported the Business Standard.  

“There are some people who are still hesitant ahead of the elections, and once the election is behind us, you could probably see many coming to the market,” Sunil Koul, Asia Pacific equity strategist, said in an interview in Singapore. Lofty stock valuations are another oft-cited reason for staying away but earnings growth should address that, he added.  

It is of course interesting that brokerages talked up the market in the last few months of 2023 on the premise that the BJP would return to power in 2024.

If that was the premise, why wait for the elections.

Well, presumably, because valuations are high and it is tough to sell a story without touching upon whether you could actually make money if bought stocks rich.

Of course Goldman has an answer for that.

According to Goldman, they are overweight the market on expectations of about 15% earnings growth compounded annually this year and the next, Koul said. 

That should keep a lid on valuations, he added. The NSE Nifty 50 Index is trading at about 50% premium to the rest of Asia Pacific.  

That was equities.

Loans are also expected to grow after elections as companies increase capital expenditure, according to Bank of America Corp.

Bank of America’s India head of corporate banking told Bloomberg TV on Thursday that they anticipated a significant pick-up in credit expansion plans of corporate India post elections.

Loan growth in India was at about 20% in the year through Dec. 29, the highest in more than a decade, latest central bank data compiled by Bloomberg show. 

The expansion was led primarily by retail loans, which in itself has been a matter of anticipatory concern by the Reserve Bank of India as well as India’s largest bank the State Bank of India.

The BankAm view is that private capex which is limited to sectors like  telecom, infrastructure and renewables will become more broadbased post May. 

Electricity generation from coal

For all the efforts to cut back on fossil fuel, a energy hungry world is still leaning heavily on it.

And in our energy segment supported by IndiaEnergyWeek

Worldwide electricity generation from coal hit record highs in 2023, while thermal coal exports surpassed 1 billion metric tons for the first time, Reuters is reporting. 

Coal-fired electricity generation was 8,295 terawatt hours (TWh) through October, up 1% from the same period in 2022 and the highest on record, according to environmental think tank Ember.

Emissions from coal-fired electricity generation also hit new highs through October 2023, topping 7.85 billion tons of carbon dioxide and equivalent gases, around 66.7 million tons more than during the same period in 2022, according to Ember.

The footprint of coal mining and exports and its use in power generation is overwhelmingly concentrated in Asia, as many other parts of the world including Europe and North America have adopted measures to phase down the use of coal for power, said Reuters.

India was the second biggest importer (172 million tons), followed by Japan (109 million tons), South Korea (80 million tons) and Taiwan (51 million tons).

China was the top thermal coal buyer, taking delivery of a record 325 million tons, which is 109 million tons more than 2022's total.

Sticking to energy and oil, most of the news around oil are to do with the fate of ships passing through the Red Sea which is not very good with tensions still high and the United States firing missiles at Houthi rebel sites in Yemen.

Brent crude is holding around $77 a barrel, steady given the general turmoil and also reflecting both weak demand and falling selling prices.

Multidimensional Poverty In India Falls

The share of India’s population living in multidimensional poverty is estimated to have fallen to 11.28 per cent in 2022-23 from 29.17 per cent in 2013-14, according to a discussion paper released by NITI Aayog on Monday. 

India’s definition of multidimensional poverty is measured using twelve indicators including nutrition, child & adolescent mortality, maternal health, years of schooling, school attendance, drinking water, electricity, housing, and assets. MPI seeks to measure poverty in a more holistic manner as opposed to solely relying on income levels to assess deprivation.

In absolute numbers, NITI Aayog estimates a total of 24.82 crore people escaped multidimensional poverty in the last nine years.

States like Uttar Pradesh, Bihar, Madhya Pradesh, and Rajasthan recorded the sharpest decline in the number of people classified as poor brd on the Multidimensional Poverty Index (MPI),, the Indian Express reported.

The discussion paper also notes that the severity of deprivation declined at a slightly lower rate between 2015-16 and 2019-21 compared to 2005-06 and 2013-14.


India 3rd Largest Buyer Of Airplanes

India is now the third biggest buyer of aeroplanes after the US and China, India’s civil aviation minister said on Thursday while inagurating the the Wings India event, a aviation industry gathering and air show.

It is of course interesting that the announcements of fresh capcity and I will come to more of that in a moment, come in the backdrop of a systemic failure in tackling pressure points, including what the country saw this week thanks to fog-induced delays.

The cascading delays exposed the lack of training and soft skills by the airlines in managing the mounting crisis.

The minister shared the Government’s aviation industry plans which are aiming for 200 airports in 6 years time and 300 million passengers. 

India’s airlines have some 1,500 aircraft orders pending, most of them announced last year with Indigo and Air India constituting the bulk. 

Also in Hyderbaad, Akasa Air annnounced on Thursday it has ordered 150 Boeing 737 MAX narrowbody planes as it eyes international reoutes as well.

Reuters reported that this is the first major order announcement for Boeing's troubled MAX jetliner programme since a mid-air cabin panel blowout in the U.S. early this month. Akasa expects the aircraft to be delivered within the next eight years.

Akasa's order for 737 MAX 10 and MAX 8-200 does not include the MAX 9 version, which has been largely grounded over the Alaska Airlines cabin panel blowout incident.

Indian airliners do not operate the 737 Max 9 aircraft.

Since it started flying in 2022, Akasa has garnered a market share of 4%, while bigger rival IndiGo has the largest share at 60% and Tata Group airlines have a combined 26%.

Akasa currently flies only domestically, with a fleet of around two dozen planes.

Speaking of fleets

IndiGo Airlines' Chief Executive Officer  Pieter Elbers said on January 18 that the airline will improve its on-time performance (OTP) by next week returning to earlier standards, after the country's biggest carrier clocked worst OTP earlier this week as dense fog restricted visibility, delaying flights, according to a report in moneycontrol.

The airline is  trying to reach above 80 percent OTP performance soon, Elbers said at Wings India 2024 event.

As of Jan 17, IndiGo's OTP remained around 43 percent, lowest among its peers, according to data from ministry of civil aviation. "Flight cancellation and delays on January 14 have caused a cascading effect on our OTP over the last week," Elbers said, adding that the airline needs to expand its digital network to make sure it's frontline staff is aware of correct information to pass on to customers.

Perhaps this was not the forum but, as aviation experts like Jitendra Bhargava have pointed out, it is indeed strange that none of the airline CEOs apologised to their passengers for the inconveniences caused in the last few days.

Or even a well formulated apology.


A Cabin Attendant Becomes President

Sticking to airlines, albeit with a slightly different twist. 

Japan Airlines  has named its first female president on Wednesday.

Interestingly, Mitsuko Tottori is a a former cabin attendant who joined the airline in 1985 and rose through the ranks to senior management.

Japanese companies in general are facing increasing pressure to boost gender diversity and tackle a gender pay gap that is the worst among the Group of Seven nations and almost double the average of the OECD grouping of advanced economies, Reuters reported.

"There are female employees out there who are struggling with their career steps or going through big life events," Tottori told a news conference adding she hoped her appointment as a president can encourage them, or give them the courage to take the next step."