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Indian Markets Buck Global Trend, Cracks 1000 Points

The plunge happened in the second half of trade on Tuesday as the BSE Sensex sank 1,668 points from its intraday high of 72,039 after having risen 615 points earlier in the day. It closed 1,053 points down at 70,371

By Govindraj Ethiraj
New Update
Indian Markets Buck Global Trend
On today’s episode, financial journalist Govindraj Ethiraj talks to veteran journalist and economics writer Shankkar Aiyar. We also feature an excerpt from a panel discussion at Konnection Annual Outlook 2024 (outlook for equities organised by Baroda BNP Paribas Mutual Fund).

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:00) Indian markets buck global trend, crack 1,000 points. Will it stabilise?
  • (06:00) Chinese Government To Step In To Buy Stocks As Panic Spreads. 
  • (08:29) Why PSU stocks are soaring and may continue to do so.
  • (17:10) Consumer product companies sales are slowing down, have they reached peak consumption ?
  • (24:53) Who is the biggest overseas buyer of Indian tea?
  • (26:13) Canada clamps down on international students, cuts visas.

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.


Indian Markets Swing Down

As market swings go, this was another big one, nothing to enter the record books but the turnaround was notable considering Tuesday’s trading day began with positive tailwinds from global markets, including of course Wall Street hitting fresh highs.

The plunge happened in the second half of trade on Tuesday as the BSE Sensex sank 1,668 points from its intraday high of 72,039 after having risen 615 points earlier in the day. It closed 1,053 points down at 70,371. The NSE Nifty closed at 21,239 with a loss of 333 points.

Large caps, including in banks, non bank finance companies and insurance companies.

Zee and HDFC Bank have something in common, unusual as it may sound. Zee dragged down media stocks and HDFC Bank dragged the Sensex down, once again. Between the two, HDFC with its high weightage obviously dragged things more.

HDFC Bank by the way hit a 52-week low with a 4 per cent fall yesterday today, losing 15% in the last one week thanks to shrinking net interest margins and weaker deposit growth. 

But media company Zee stole the show, after Sony called off a proposed $10 billion merger yesterday and to add some salt to proverbial wounds, asked for a $90 million compensation.

The stock fell 33% hitting lower circuits all the way. 

At least eleven brokers including Citigroup Inc. and CLSA reduced their ratings on the Zee as efforts to create an entertainment giant in Asia’s biggest streaming market collapsed amid a stalemate over who would lead the combined entity, Bloomberg reported.

The entire media sector is set to see a fresh flurry of action as smaller players try to consolidate to take on the platforms like Google and Meta who now lead the market, a far cry from even a decade ago.

Or as entertainment folks would like to put it. Another season of the drama is sure to drop on our screens.

Meanwhile, Reliance Industries is in talks with Walt Disney to take over or merge its Indian arm, a transaction the media industry will watch with greater interest now to see if any parallel moves will emerge towards Sony or Zee.

Crude Oil

Oil too see-sawed though not as dramatically as the Sensex of Nifty yesterday.

And of course a fall was welcome.

Prices dropped as supplies or the threat of it increased once again neutralising rising Mideast tensions, more specifically after the  US and UK launched more air strikes against Houthi rebels in Yemen which faces the Red Sea on which container and crude carriers pass on their way to and from the Suez Canal.

Brent crude hit and dropped below $80 a barrel.

The Organization of Petroleum Exporting Countries has said it will cut production but there is an abundant non-OPEC output forecast, with the International Energy Agency forecasting ample supply, Bloomberg reported. 

In addition, Libya restarted flows from its largest field after a halt, and US drillers are recovering from a freeze that hurt operations.

The last crude oil spike happened after reports of Ukrainian drone attacks against energy facilities on Russia’s Baltic coast.

WHich obviously means crude oil prices face two different geopolitical stress points, in the middle east and in Russia.

Today’s energy segment was supported by India Energy Week, to be held next month on February 6. Log onto www.indiaenergyweek.com for more details.

More Restrictions On Gold Imports

The Indian government has increased the import duty on gold and silver findings, used in making jewellery, and on precious metal coins from 11% to 15%  effective from Jan. 22, to bring them in line with duties on gold and silver bars, Reuters is reporting.

The Ministry of Finance also hiked the import duty on spent catalysts containing precious metals to 14.35% from 10.1%.

The move hopes to prevent circumvention of the duty on gold and silver bars, a government official told Reuters, after a surge in imports in the last two months of gold findings: hooks, clasps and other components used to make jewellery.

Increasing import duties on gold is a general throwback to the past and usually only encourages and increases smuggling as the data is already showing.

China’s Government To Step In To Buy Stocks

Chinese authorities are considering a package of measures to stabilise the slumping stock market, sources told Bloomberg.

This effectively means the Government could step in and start buying stocks to stabilise the market and reflect concern and perhaps even panic.

Policymakers are seeking to mobilise about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilisation fund to buy shares onshore through the Hong Kong exchange link, said the people, asking not to be identified discussing a private matter. 

They have also earmarked at least 300 billion yuan of local funds to invest in onshore shares through China Securities Finance Corp. or Central Huijin Investment Ltd., the people said.

The benchmark CSI 300 Index hit a five-year low this week. 

Beijing could also be trying to calm irate investors who are already reeling from a property downturn.

The formation of a state-backed stabilisation fund has been contemplated since at least October, though some investors have raised doubts over its efficacy as Beijing’s previous rescue efforts haven’t always worked. 

The plans are still at the planning stage and will be announced as soon as this week if approved by the top leadership, sources told Bloomberg. 

In all, more than $6 trillion has been wiped out from the market value of Chinese and Hong Kong stocks since a peak reached in 2021.

The Hang Seng China Enterprises Index — a gauge of Chinese shares listed in Hong Kong — is down more than 10% in 2024. It is near its lowest level in almost two decades..

India Overtakes HK

Speaking of lowest levels and Chinese stocks, India’s stock market capitalization has overtaken Hong Kong’s for the first time, thanks also to record high levels.

The combined value of shares listed on Indian exchanges reached $4.33 trillion as of Monday’s close, versus $4.29 trillion for Hong Kong, according to data compiled by Bloomberg. 

That makes India the fourth-biggest equity market globally. 

Its value crossed $4 trillion for the first time on Dec. 5, with about half of that coming in the past four years.

“We see India as the best structural growth story across not just emerging markets, but worldwide,” Evan Metcalf, CEO at Global X ETFs, told Bloomberg. 

Global pension and sovereign wealth managers are also seen favouring India, according to a recent study by London-based think-tank Official Monetary and Financial Institutions Forum.

Why PSU Stocks And Valuations Have A Way To Go

Consider this: in September 2020, the government offered the shares of Mazagon Dock Shipbuilders at Rs 145 per share. The value of 100 shares bought at Rs 14,500 is now Rs 236,500. 

If you invest in Rail Vikas Nigam and in IRFC. For instance, 100 shares of RVNL bought at Rs 1,900 in the March 2019 IPO are worth Rs 32,000, and 100 shares of IRFC bought at Rs 2,600 at the IPO are worth Rs 17,600. 

The maths has been put together by veteran journalist and economics writer Shankkar Aiyar in his latest column in The New Indian Express.

Aiyar says in his column that there is much noise about valuations and sustainability—about the lack of liquidity, the monopolistic status of the enterprises. 

All of which is worthy of attention. 

But while the benchmark Nifty50, which includes private sector companies, has posted a gain of around 76 percent, the shares of 25 PSEs, over a third of the universe of listed PSUs, have recorded gains of over 100 percent in market value. 

The companies come from different sectors and not much or little in common except in a few cases.

I reached out to Shankkar Aiyar and began by asking him what explained this phenomenon and of course the next and obvious one, would this continue ?


Decoding The Consumer Product Slowdown story

In Monday’s episode, we spoke of how value growth had slowed down in India’s entire consumer products sector, with the whole of last year seeing barely a 2% growth with December 2023 reporting negative growth.

More units of products were sold but prices were down so it got adjusted lower.

Interestingly, are India’s consumer markets reaching peak consumption, for example, in soaps.

So what is growing within the consumer goods space and not ?

I put this question to Gautam Duggad, Head of Research and Director of Institutional Equities at investment bank Motilal Oswal as part of a panel I moderated on outlook for equities for 2024 organised by Baroda BNP Paribas Mutual Fund in Mumbai last evening.


Tea Exports, Guess Who Is Buying

Indian tea companies are rocking it in Iraq, making up for the fall they have seen in some West Asian major markets, the Business Standard is reporting.

Exports to Iraq between January and October 2023 stood at around 29 million kg compared to 12.06 mkg in the same period the previous calendar year, according to data from state-run Tea Board of India.

So the Iraqis may not really be drinking more tea but more likely that India is filling a gap vacated by Sri Lanka. 

Also, demand from Russia, United Arab Emirates (UAE) and Iran, which are major importers of Indian tea, has declined. 

Himanshu Shah, chairman of M K Shah Exports, told Business Standard that Iraq was predominantly an Indian tea market some 30 years ago but as Indian tea companies increased their business dependence on Russia, Sri Lanka captured the Iraq market. 

“Now, a reverse is happening as Sri Lanka is yet to go back to its normal crp level after the economic crisis.”

Sri Lanka accounts for about 50 per cent of the global trade for orthodox tea, which has a large market in West Asia, but its production has declined gradually from a peak of 340 mkg in 2013. 

Canada Two Year Cap

This was speculated in recent weeks but it has happened.

A massive rush of foreign students into Canada including from India has led to Canada  imposing an immediate two-year cap on new international student visas to tackle a housing crisis and target institutional 'bad actors',

More than 800,000 international students were issued temporary study visas in 2022, of which India sent 319,000 students.  

Immigration Minister Marc Miller said as part of the cap there will be a 35% reduction in new study visas in 2024. The cap is expected to result in 364,000 new approved permits in 2024. Nearly 560,000 such visas were issued last year.

The cap will be in place for two years; the number of permits to be issued in 2025 will be reassessed at the end of this year, he said.

In a media statement, Ontario's Minister of Colleges and Universities Jill Dunlop said her government recognises that 'some bad actors are taking advantage of these students with false promises of guaranteed employment, residency and Canadian citizenship.'