The Markets Are Nearing A $5 Trillion Market Capitalisation

• (00:00) Stories Of The Day
• (01:00) The Markets Are In Striking Distance Of $5 Trillion Market Capitalisation
• (08:13) Oil Price Rise A Concern, Says Top Indian Energy Bureaucrat, As Crude Inches Close To $90 A Barrel
• (09:41) Gold Prices Are Being Dragged Upwards And Why The Rise Could Continue
• (18:56) Why Tatas Should Fix Air India Before Merging With Vistara
• (20:52) 30% Jump In Passenger Aircraft Capacity Leads To Spike In Global Air Cargo As Well, Double Digits For Third Month In February

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.

---

Mid Cap Mayhem & 5 Trillion Market Cap

The markets were down. But those are the benchmark indices and of course there is a reason why they are called benchmarks. 

But as we are increasingly seeing, there is a rest of the market which is clearly moving on its own steam, up, down and then up again, to record highs. And the only lesson is that if you want to stop something, then perhaps don’t wave a red flag.

Let’s get back to the benchmarks. The BSE Sensex was up and down before closing down 27 points at 73,877 while the Nifty50, on the other hand, closed down 19 points at 22,435. 

Now the broader markets. The BSE MidCap index hit a new record high of 40,685 before closing 0.6 percent higher, while the BSE SmallCap index advanced 1.2 per cent. This in turn was driven by a strong rally in power, pharmaceutical and consumer durable sector stocks, according to Business Standard research.

This is the third day the Midcap indices have been trading higher, also up 10% from its March low and further reflecting the strength of the underlying flows into stocks and possibly the sheer determination of investors to find equity market options for their savings and earnings.

I reached out to G Chokkalingam, Founder of Equinomics Research and began by asking him what to make of the mid cap mayhem and the dramatic turnaround and more importantly, how to approach the market at this point.

---

Meanwhile in the currency markets, the rupee ended at a record closing low weighed down by dollar demand from local oil companies and weakness in Asian peers.

The rupee closed at 83.43 against the U.S. dollar, as compared to 83.38 in the previous session. The rupee hit  its historical low of 83.45 hit last week.

Most Asian currencies fell including the Thai baht and the Chinese yuan.

India Expresses Concern As Oil Prices Inch Closer to $90 

Rising prices are a cause for concern for the world's third-largest importer of crude oil, India's oil secretary Pankaj Jain said on Wednesday.

As a consuming nation any increase in prices will cause concern and anxiety, Jain said at an industry event, referring to the "geopolitical premium" in crude prices, reported Reuters.

If oil prices continue to stay higher for a month longer, oil marketing companies will take an appropriate decision, the secretary said, when asked if there is a case for increasing retail fuel prices.

He was referring to oil marketing companies like BPCL, HPCL and IOC

On Wednesday, oil prices rose again the overhang of supply risks stemming from Ukrainian attacks on Russian refineries and the continuing tensions in the middle east. 

Brent crude futures for June rose 75 cents, or 0.84%, to $89.67 per barrel.

Prices specifically jumped on Tuesday after another round of Ukrainian drone attacks on Russian refineries.

Why Gold Prices Could Rise Further

There is a fundamental question. Which is why central banks across several countries including India are buying gold at the levels they are. This is one reason why prices are going up by the way.

It is not that central banks don’t buy gold but the levels and the intensity of purchases is obviously impacting the market.

Moreover, younger people are buying gold in China as well, according to reports. All this is pushing prices up. We will come to a price outlook shortly.

What does this mean for India at this point ?

For one, with gold now stretching towards Rs 70,000 per 10 grams, or up almost 10% in a month, customers are staying away.

A report in ET analysing jewellery stocks says 15 jewellery stocks - yes there are more than that - with market cap of Rs 100 crore or more have given negative returns of up to 19% in between March 1 and April 1.

The laggards included Titan, Senco Gold and PC Jewellers.

Kalyan, Radhika Jeweltech and Goldiam International did better.

Gold imports too have fallen sharply in March. Industry estimates hardly 25 tonnes were imported from the 100 tonnes the previous month. 

Marriages and festivals demand drivers but the test to see if consumption levels hold will be seen on the occasion of  Akshaya Tritiya in the first week of May, usually a time to buy gold.

Meanwhile, jewellery demand could give way to coins and bars and other forms of gold investment.

I reached out to Prathamesh Mallya, DVP- Research, Non Agri Commodities and Currencies, Angel One and began by asking him what was driving up gold prices, the role of China and finally and importantly, the outlook ahead.

---

Short Seller Says Tesla Can Go Bust

Tesla  could “go bust” while its stock could fall to $14, Per Lekander, a hedge fund manager who has been shorting Elon Musk’s electric car maker since 2020, told CNBC on Wednesday.

Quite likely his comments were more figurative than literal but they did follow Tesla reporting 386,810 vehicle deliveries in the first quarter of the year, significantly below even the lowest market estimates.

“This was really the beginning of the end of the Tesla bubble, which probably, arguably was the biggest stock market bubble in modern history,” Lekander, managing partner at investment management firm Clean Energy Transition, said on “Squawk Box Europe.”

Meanwhile, the FT reported that Tesla is likely to scout for locations to manufacture EVs in India for a $2 to $3 billion investment in areas like Maharashtra, Gujarat and Tamil Nadu which have automotive hubs.

Tesla has been desperately wooed by India including via a radical policy revamp which allows automotive companies to import EVs into India at reduced duties if they commit to manufacture locally.

Record Indirect Tax Revenues

Indirect tax collections for FY24 have exceeded the revised estimates (RE) of Rs 14.84 trillion by "a handsome margin", helped by a record GST mop-up, a top government official said.

Indirect tax collections include customs and Union Excise Duty and have exceeded the Revised Estimates by a handsome margin, the official said.

The gross GST mop up for 2023-24 also marks a milestone with the collection of Rs 20.18 trillion -- comprising state GST, Central GST, integrated GST and compensation cess -- exceeding the previous year's collection by an impressive 11.7 per cent, the chairman of the Central Board of Indirect Taxes and Customs said in a letter, reported by Business Standard.

Why Air India should be fixed first

There has been chaos in the operations of Tata owned airline Vistara now in its ninth year of operations.

More than a hundred flights have been cancelled going by reports even as pilots staged a walkout over potentially reduced salaries ahead of a merger with Air India, which is also owned by the Tatas. 

Moneycontrol reported the Vistara Airlines management telling pilots that the said salaries for  "extra working hours" would be credited post-integration with Air India's roster and asked them to call off the strike.

The pilots were unhappy with the lower compensation structure that would come into play when equalised with Air India.

Which brings me to the larger point.

While a merger makes sense, equalising a clearly sharper product and service being Vistara with a legacy, baggage-laden weak product on the best of days is a merger challenge which would be a nightmare for any business leadership.

The merger, the intention of which was announced in November 2022, is expected to go through next year which is 2025 at the earliest.

The combined entity will see the Tatas owning around 75% and Singapore Airlines which already owns a 49% stake in Vistara owning around 25%.

Now the Tatas and maybe Singapore Airlines must have thought this through and are perhaps left with few options but bringing parity and or merging before elevating Air India to a desirable, premium product should come before everything else. 

It's been a little over two years since Tatas took over Air India and there is a very long way to go to achieve consistent product and service delivery. 

There are of course occasions when you could be surprised with friendlier staff, smoother checkins and the odd new aircraft but you could also continue to be shocked with long haul aircraft where seats are quite literally falling apart. 

Air Cargo Grows in February

Global air cargo markets showing continuing strong annual growth in demand. 

Total demand measured in cargo tonne-kilometres (CTKs*), rose by 12% on February 24 compared to February 23.

This is the third consecutive month of double-digit year-on-year demand growth, the International Air Traffic Association or IATA has said. 

Capacity, measured in available cargo tonne-kilometres (ACTKs), also increased by 13.4% compared to February 2023 (16.0% for international operations). 

Cargo is carried independently by freighter aircraft and within the bellies of passenger aircraft.

IATA says there was an increase in international belly capacity accompanying growth in passenger markets (29.5% year-on-year increase), which far exceeded international capacity on freighters (3.2% year-on-year increase).

The African carriers led the race this time followed by the middle eastern and European carriers.