Indian Markets Hold Gains Of Last Week
Foreign institutional investors have invested close to 24,000 crore or close to 3 billion dollars in the month of May so far
On Episode 584 of The Core Report, financial journalist Govindraj Ethiraj talks to Ankit Mehta, CEO at ideaForge Technology.
SHOW NOTES
(00:00) The Take
(04:41) Indian markets hold gains of last week, valuation concerns return
(07:12) Gold prices ease off but are still high for jewellery purchases
(08:08) Turkish airport services company Celebi goes to court in India
(09:24) China steps up buying of Canadian crude
(11:16) How the India-Pakistan war has changed the dynamics for India’s largest drone makers
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 [email protected].
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Good morning, it's Monday the 19th of May and this is Govindraj Ethiraj headquartered in Broadcasting and Streaming from Mumbai, India's financial capital and we've already seen some rains including on Saturday morning here.
The Take
Many drone enthusiasts started by using their drones built or bought via imports for simple tasks like taking pictures, shooting video and then going on to mapping and surveillance and more complex tasks including real time. Ankit Mehta and his co-founders started Mumbai based IdeaForge with roughly the same objectives almost 20 years ago.
All its founders are IIT Bombay graduates and postgraduates and have combined passion with commercial pursuit and achieved a degree of success including an initial public offer two years ago. But when terrorists attacked the city of Mumbai in 2008 in what is known as 2611, Mehta and his colleagues realised drones could do much more and they could do something bigger for them as a company. And then IdeaForge began a journey whose growth intersected with the needs of both law enforcement and recent years defence applications as well.
Today IdeaForge says its dual use that civil and defence unmanned aerial vehicles have done over 650,000 flights and a new one takes off every three minutes from their factories. If a terror attack in 2008 changed Ankit's company's trajectory in many ways, the events following the terrorist attack on Indian civilians in Kashmir last month will trigger even greater shifts not just for IdeaForge but for more companies and sectors. There have been at least three categories of battleground developments in the latest conflict between India and Pakistan.
First is the active use of drones in some ways as a substitute for aircraft and aerial warfare. Across the world many countries are already looking at inducting more drones and are using them. Perhaps the best current example of this is Ukraine where youngsters are literally soldering and screwdriving drones together and sending them with deadly payloads towards Russian forces.
The second is cyber security. India has been seeing massive cyber attacks on infrastructure as well as the financial system. And the third is misinformation or psychological operations or psyops.
A paper just put out by researchers at the Observer Research Foundation concludes that hacktivists from Pakistan attacked India's defence-related organisations, state-owned enterprises with distributed denial of service or DDOS attacks. India's financial sector has been a target too. The government's computer emergency response team or CERT-IN issued an advisory noting the risk of cyber threat campaigns specifically targeting organisations like the Bombay Stock Exchange and the National Stock Exchange who then restricted foreign access even as they initiated enhanced cyber risk monitoring in recent weeks.
While such an advisory and threat response is unusual, India's financial system is usually under some attack at some level or the other including independent banks. In my own conversations with chief technology officers in the banking system, most if not all such cases or attacks are never disclosed publicly for obvious reasons but obviously happen all the time. But the effort to thwart these attacks which could slow down or freeze systems is constant.
Here is the opportunity. Both in the case of drones and cyber security, it shows a far greater need for private sector participation and entrepreneurial involvement in the nation's defences than perhaps ever before. While the private sector is rightly playing a growing role in areas hitherto reserved for the government from aerospace to space technology and of course defence, the opportunity that lies ahead is of a far greater magnitude.
And this I would argue has revealed itself only in the last few weeks in ways we obviously did not expect. The latest conflict on our borders has demonstrated that not only have new threats emerged but countering those new threats will take skills and innovation not found within government or for that matter even traditional defence technology companies. Bridging the innovation potential within the country with the new battlefield demands whether for advanced drones, cyber security or fighting misinformation will take a sharper focus than there is.
It's also a unique chance to leverage our own talents more broadly and widely to win the next war too and thus create opportunity and economic growth with new jobs and enterprises at the same time.
And that brings us to the top stories and themes of the day.
Indian markets hold gains of last week. Valuation concerns return.
Gold prices ease off but are still high for purchasing jewellery.
Turkish airport services company Celebi goes to court in India.
China steps up buying Canadian crude in a shift that might be more permanent.
And how the India-Pakistan war has changed the dynamics for India's largest drone manufacturers.
Strong momentum sustains markets last week
Foreign institutional investors have invested close to 24,000 crore or close to 3 billion dollars in the month of May so far including on Friday when the markets were down marginally. Now that's a key indicator to watch and it does not appear that it's likely to shift in trajectory even if the absolute numbers go up and down. Overall last week saw the markets rising almost 4.2 percent, its best weekly run since April 18th on that truce with Pakistan. Further progress on trade talks with the United States and macro numbers lining up together. The week of course began with the Sensex and Nifty posting the largest single-day gain in over four years after that ceasefire agreement. On Friday the Nifty ended 42 points down at 25,020 while the Sensex was down 200 points at 82,331.
To recap how exciting a week last week was, it saw the U.S. and China agreeing to slash reciprocal trade tariffs for 90 days with the U.S. reducing duties on Chinese imports from 145 to 30 percent while China reduced its tariffs on U.S. goods from 125 to 10 and then of course the truce between India and Pakistan and then other factors like macroeconomic numbers increased foreign portfolio investment. So the markets clearly have a lot more to digest in coming days to discern which way it could go.
Meanwhile the broader markets also continue to outperform the benchmarks with small cap stocks doing particularly well. The Nifty small cap 100 and the Nifty mid cap 100 indices closed with gains of just under two percent and one percent respectively. Meanwhile Wall Street is on a roll as if there is no tariff problem or inflation challenge in the U.S. because of tariffs at all. The S&P 500 rose on Friday for the fifth session and rose sharply for the week as well according to CNBC adding that the Dow Jones industrials Friday advance put the 30 stock benchmark into positive territory for 2025 for the week. The S&P 500 was up five percent, the Dow about three and a half percent and the Nasdaq composite over seven percent. So if you look at India 4.2 percent and the Wall Street between five and seven percent markets overall seem to be rising at least between India and the United States. Most technology stocks like Nvidia, Meta and Apple also had a good week last week and currency the rupee was flat last week closing at 85 rupees 50 paise against the dollar almost unchanged from its close of 85 rupees 55 in the previous session having declined 0.1 percent on the week after falling nearly one percent the previous week according to Reuters.
The Gold Conundrum
Gold prices dropped more than two percent on Friday and was set for their worst week since November thanks to increased risk appetite from the U.S. China trade agreement that weighed on the market according to Reuters. Spot gold was down to about $3,188 as of Friday and down about four percent for last week. Contrast this with the record high of $3,500 per ounce hit in April.
In India high gold prices provide a feel-good factor to those who already own it but not those who want to buy it. With prices just under a hundred thousand rupees per 10 grams it is obviously prohibitive for most families including those who buy for occasions. High prices are also affecting jewellery purchases which have dropped sharply which have led to job losses amongst jewellery makers across the country according to reports.
Turkish Ground Handling Company Celebi Goes To Court
The Delhi High Court will hear on day two pleas by Turkish company Chelebi Airport Services India and another firm against the decision of the watchdog the Bureau of Civil Aviation Security revoking its security clearance in the interest of national security. The move came after Turkey backed Pakistan and condemned India's strikes on terror camps in the neighbouring country and Turkish drones were also in force deployed against India. Chelebi operates across nine airports and employs over 10,000 people.
The court's response will be illustrative on how Indian courts could or will respond to situations like this because they involve commercial considerations by companies headquartered or incorporated in India and are essentially of a non-sovereign nature at least from the looks of it. Meanwhile Bloomberg reported Chelebi Aviation saying on Saturday it's fully cooperating with Indian authorities and adhering to regulations after those operations that's ground handling and cargo warehouse operations were suspended. Chelebi said that they are closely monitoring the situation and cooperating fully with the relevant authorities and following the process diligently and within the legal framework in close cooperation with relevant local authorities.
Crude’s Shifting Sands
China has emerged as the top customer for Canadian oil shipped on the expanded Trans Mountain pipeline as the U.S. trade war has shifted crude flows in the year since the pipeline started operating according to Bloomberg. The roughly $24 billion Trans Mountain is Canada's only east-west oil pipeline carrying oil to the Pacific coast where it can be loaded onto tankers for export and it started operation just about a year ago. While oil is actually exempt from U.S. tariffs Canada has sought to diversify its exports thanks to those U.S. duties on crude which were imposed for a short time and then of course Donald Trump's threats to annex the country. This is also a fresh indicator of the fact that even if the tariff threat goes away countries and companies are unlikely to place all their eggs in the American basket so to speak going forward and to that extent the shifts in global trade and the geopolitics of it are going to be around for a much longer time till trust levels are restored if ever so. Canada shipped about 207,000 barrels per day on average to China from an average of about 7,000 barrels per day in the decade to 2023 Bloomberg quoted Kepler data saying. The U.S. took about 173,000 barrels per day from that pipeline in the same period. Canada is the world's fourth largest oil producer but its main oil producing province of Alberta is landlocked with limited access to tidewater ports says Bloomberg which adds that this also means that the bulk of Canadian oil about 4 million barrels per day or 90 percent is exported to the U.S. via pipelines that run north-south. Meanwhile Brent crude futures were up a little under a dollar to about $65.41 a barrel or just under $66 a barrel while U.S. West Texas intermediate crude futures were at about $62.50 a barrel.
The Future Of Drone Warfare
The latest India-Pakistan conflict on the border has presented new challenges and perhaps opportunities for defence equipment and the role of the private sector in it. For one, drones have played a significant role in also delivering payloads in the latest conflict. Drones are also changing the nature of air warfare across the world including the Russia-Ukraine war with Ukraine using drones of varying degrees of sophistication to level the playing field in more ways than one.
The future of drone warfare means a blending of the physical aeronautical capability of unmanned aerial vehicles or UAVs with the intelligence that goes into it including the artificial intelligence that will determine and respond to threats including electronic warfare. So how is India's well-known drone maker IdeaForge gearing up for this world and how have things changed after the India-Pakistan conflict? I spoke with Ankit Mehta, co-founder and CEO of the Mumbai-based IdeaForge and I began by asking him the one thing that had changed in the last two weeks.
INTERVIEW TRANSCRIPT
Ankit Mehta: You know first of all for not just us but for everybody it's become real real right. Earlier when Galwan happened what was real was observation. We had perhaps very little observation on the other side and we went ahead and we fixed observation.
Now in this scenario we are also looking at observation because it is required to pick up targets but we need action as well. So that has become very very real now for everybody and in terms of reality also the reality of what we are observing in other wars as well the electronic warfare because you are trying to prevent the adversary from entering your territory you are also trying to make sure that you can enter the other territory. So how to be resilient against electronic warfare that again is a very very big reality which we have been already building for now the urgency to induct systems of that nature will really come up in a very big way right.
We launched Netra 5 at the beginning of the year with exactly those capabilities as to how we can be resistant to electronic warfare and make sure that we are able to create an end effect and we are trying to see that it's become very real now. And what does Netra 5 do? See Netra 5 is a folding quadcopter platform that can be launched from a relatively more compact form factor than earlier be able to do really long flight time missions while being able to resist electronic warfare in terms of it can operate in GPS denied conditions it can operate in conditions where there is a bunch of jamming so it does frequency hopping it also has got a very unique capability of doing broadcast communication in the sense that it can basically do persistent downlink. So that is again something that nobody else has then it also has the ability to take a payload so it can be leveraged for precision payload delivery in certain circumstances it is also something that has a lot of other features in terms of obstacle sensing and obstacle avoidance.
So it's a very very unique quadcopter drone that we have launched its one of the most advanced systems in the world of that nature and sort of packs everything that is becoming very real now in this war.
Govindraj Ethiraj: Right and one of the things we've been seeing for example in the Russia-Ukraine war is the use of drones and also I mean the interesting use of them because people are really sitting in bunkers with soldering irons and wires and putting them together it's also changed the dynamics of war and I guess that's what's evident in our context as well and maybe in future too.
Ankit Mehta: So what does that mean for you as a company? For us as a company I think it's very clear that earlier one used to think that there is only one sort of use case one approach one specific category that needs to be built now we are realising that we need capabilities and assets across all categories of platforms and therefore you know as a business we've also started to build multiple categories of platforms each category of platform has a different capability there are platforms that can do observation by taking off at a much longer range or a much shorter range depending on who's carrying the asset and then it's also about how and where can you cause an end effect and at what range can you cause an end effect so if you want to penetrate sufficiently by remaining within your territory then you need to have long range assets you need to also have the capability of resisting or getting detected so there are so many things and all of them are getting visually you know are being validated for example there are drones that are being used which are just you know FPV drones where drones are just taking off from somebody wearing a goggles and they're going and causing an effect all of it is because of the EW resilience which is a problem so depending on how you want to scale and right way to scale has to be determined for every country but ultimately we have to realise the balance of what is going to be the training deck if we don't use autonomy what is going to be the cost of war if we don't use assets which are multi-role and then what is going to be the end effect that we want to cause and the precision with which we want to cause so all of that has to be thought through before we arrive at what's really going to be leveraged or needs to be leveraged
Govindraj Ethiraj: right and when you think about the drone company like yours i'm sure you started with mapping surveillance agriculture and i don't know whether they are called low-hanging fruit or high-hanging fruit but they're definitely businesses that are more accessible what's your current sort of portfolio when it comes to defence linked applications versus others and do you see that changing
Ankit Mehta: so pure defence applications uh pure applications where we work with the defence of the country it's about 60 last year and another 40 was civil use cases now civil use cases also have a mix of surveillance and mapping applications surveillance may still be heavier because that's an area where we have a lot of civil conflict as well that we need to work towards and resolve so it is usually heavier towards surveillance related applications it is also going to be increasing on the geospatial side with the national geospatial mission taking up and picking up a lot of steam from the end of the last year and what's changing in the heart of the system
Govindraj Ethiraj: so one is the flying part of it the aeronautical part of it but within the drone itself i mean you talked about jamming capability and gps denial ability to work without gps and so on so what else is on the horizon there
Ankit Mehta: what is going to be very critical going forward is apart from gps denial having resilient communications having the ability to carry multiple payloads or have modularity in payloads etc is going to be the requirement for ai on the edge you need compute on the edge you need to make sure that you know as the tactics evolve in the field as we do something there will be a reaction we need to adapt ourselves to change our tactics all of that's going to be possible when there is intelligence on the edge when there is some form of capability of updating the algorithm updating the ai to detect something new or to take a different action so that's going to be critical multi-agent systems will become very critical because you need that one person can operate many systems and you can overwhelm the enemy defences etc so there are going to be these kind of very critical changes that's going to happen to make sure that we have more capable systems going forward and
Govindraj Ethiraj: i mean i heard some of your systems entering that world wherein you're carrying ammunition or destructive payloads
Ankit Mehta: so i think our systems are capable of carrying payloads and usually we don't uh you know from the factory ship anything uh on the system that can cause an end effect typically the end user will leverage the payload capacity the way they deem it's useful ahead what
Govindraj Ethiraj: Right so as you look challenges that you see becoming let's say more competitive and cutting edge when i say cutting edge in a global context and what are the opportunities as well you know if we do all
Ankit Mehta: the things we said right if we are able to do very good in ew resistance and resilience against those systems if we have multi-role assets if we have assets that have intelligence on the edge i think we will at least for a short period of time we have the ability to programme ourselves to do almost what is desired on the field even if there are changes on the other side but having said that we also need to acknowledge that there will be a need for better performance on the systems because the delta on technology or tactics may get caught up but the delta on performance raw performance may not get caught up like for example a brahmos is an edge that you can't catch up to simply by changing tactics right you have to catch up to that with technology so i think it's going to be very similar on drones as well so it will be very clear that what echelon is carrying what type of asset and how good is that asset as compared to what the adversary will carry in their same echelon or similar echelon so you need that kind of superiority not just parity but you now need to look at superiority of whether your assets are matching or better in that one sense
Govindraj Ethiraj: Right last question you're a bunch of engineers from it who started this company but today in terms of the time you devote how much of it is let's say on again on the aeronautical side how much of it is on the computing and the intelligence that you just spoke of and how is that going to likely get distributed as you look ahead looking at this
Ankit Mehta: A good part of the team is actually intelligence capability you know it's very clear that that's the future right and it's not just that we need to have connected systems we need to have the ability to evacuate data from the edge make it available wherever it is possibly required make sure that there is an automated end effect that can be taken from some other sensor and created uh you know using a drone so all of this connectedness is the other area that we need to ensure that in the future we are a part of that network that entire network centric warfare network centric systems assets intelligence all of that has to tie in together to create a unified field that is automated because now reaction times are very very small like you not gonna get too much time where you know a lot human intervention and the time gap that they may present can be afforded in a field where you are getting fired upon by missiles and other assets which are kinetic
Govindraj Ethiraj: Right Ankit thank you so much for joining me
Ankit Mehta: Thanks so much real pleasure to be here
