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Indian Markets Hits Record High For 3rd Consecutive Session

We have been talking about how investors are shunning China and that’s true. But like markets and like investors, when the valuations go really low in one place and really high in another, they start revisiting their positions

By Govindraj Ethiraj
New Update
Indian Markets Record High
On today’s episode, financial journalist Govindraj Ethiraj talks to Harsh Dole, Vice President and oil and energy analyst at IIFL Securities

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (00:50) Indian markets hits record high for 3rd consecutive session.
  • (02:19) Investors Balance Temptation To Buy With High Valuation Concerns 
  • (05:52) India, the third most profitable region for HSBC, replaces China.
  • (06:56) Oil prices fall, presenting a primer on crude varieties.
  • (17:34) US Steps Up Chip Subsidies Again

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 Hit Another Record High

The markets broke a 6 day winning streak, long by most standards and swung away and downward towards close on Wednesday. 

There are lots of cues that the markets are digesting at the same time, some good and others not so, some short term and some fairly long and we will come to those in a moment.

The Nifty 50 rose sharply in early trade to hit a record high for the third session in a row, before reversing gains in the final hours.

During the day the BSE Sensex hit a high of 73,267.80 but closed down 434.31 points , or 0.59%, at 72,623.09.

Meanwhile, the Nifty had climbed to an intraday high of 22,249.40. At close, it was down 142 points at 22,055.05.

We have been talking about how investors are shunning China and that’s true. But like markets and like investors, when the valuations go really low in one place and really high in another, they start revisiting their positions.

And the views are many but you have to also read closely because the timing horizons vary. 

And which is why if you were a long term investor then many of the projections sound fine but if you are not, then you would wonder if investors, particularly foreign ones, say one thing in one month and do another month.

Citibank Research says investor interest in India remains very high given the increased weightage of the country in MSCI indices, even as the high valuations continue to weigh on sentiments.

The reasons they quote are a favourable bias on India are secular growth outlook particularly relative to peers, supportive macro, expectation of policy continuity in an election year, financialization of savings, it said.

India's weight in the MSCI EM Index is now 18%, up from 13% in January 2023 and has edged much closer to China from being about a fifth just four years ago.

However, note that a lot of investors do struggle with high valuations, resulting in some money staying on the sidelines, Citi Research said, as reported by NDTV Profit.

Meanwhile, Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies told the same station he was in no rush to pile more money into India stocks as he doesn't want to go after "leftovers" after missing the recent rally.

The Mumbai-based fund manager said the problem for India is that valuations, whilst they're not killing, were not so attractive when compared to China.

"It has been a great rally, don't get me wrong. And I think everyone's scratching their head a little bit, how they missed it," he said. 

According to Holland, a lot of the gains have already been made in individual stocks rather than just the indices, adding a growth of around 15% in earnings and a gain in the market is anticipated for FY25, he said though both earnings and the markets could go up further.

So these were the two more immediate views.

Meanwhile, Morgan Stanley chief Asia and emerging market strategist told CNBC TV18 that Asian and emerging market equities are in a new era led by India and followed by Japan, as they are in a strong secular bull market on the back of strong earnings growth and nominal GDP growth.

"If we look at the most recent quarter in India, earnings grew 23 percent year-on-year and these are very strong fundamentals driving the bull market, and that's a sharp contrast to China which is unable to grow earnings in the current deflationary environment," he said.

According to him, China and its property crash has led to a downward spiral in consumption activity, wages, and return on equity, while this is  completely different in India and the country is in a "virtuous cycle of strong GDP growth and robust capital inflows".

"In the context of much more stable interest rates and exchange rates that we have seen in India are all consequences of persistence of a macro reform agenda which has produced a greater macro balance in the country," he said. "It is no surprise to us that India is a persistent secular bull market."

Wall Street was waiting for Nvidia Corp earnings overnight and the event itself was so big that Goldman Sachs Group Inc.’s trading desk called Nvidia “the most important stock on planet earth.”

Nvidia is like the HDFC Bank of the US indices…see the comparison, actually there is none, except the high weightages.

Nvidia alone has been responsible for one-third of the Nasdaq 100 Index’s gains this year, said Bloomberg.

Stock futures were actually low following worries over whether Nvidia Corp. can deliver another blockbuster earnings.

 Nvidia is at the heart of the AI revolution, boasting the best performance in the S&P 500 this year after more than tripling in 2023.

HSBC Reports Record Profits

India has replaced China as the third largest profitable region for Hong Kong and Shanghai Banking Corp Ltd (HSBC) led by strong growth in its global banking and markets division which services large corporations and includes treasury operations, the Economic Times has reported.

HSBC, Europe’s largest bank by assets, said its India profit before tax rose 19% to $1.51 billion in 2023 from $1.27 billion a year ago behind Hong Kong and the UK, the bank's two largest business regions, results released on Wednesday showed.

Meanwhile, HSBC’s full-year 2023 pretax profit missed analysts’ estimates on Wednesday, hit by impairment costs linked to the lender’s stake in a Chinese bank

HSBC has the largest workforce in India of 42,000 out of the 2.21 lakh full-time employees of the bank at the end of 2023.

Oil And Its Many Forms

Some good oil news at least for the day.

Brent was down to near $82 a barrel from around $83 yesterday. 

Oil has remained in a $10 trading range this year as the push and pull of bearish and bullish factors led to lower volatility, according to Bloomberg.

A senior oil analyst at DNB Bank told Bloomberg that oil prices are expected to continue to be range bound short term despite escalating tensions in the middle east.

Which of course is a good time to ask where the Indian oil basket stands today and is likely to. Remember, India imports almost 85% of its crude requirements.

But before we get into that, in yesterday’s edition I spoke of Russian crude and said so-called crude in a few places, something two extremely alert listeners and friends pointed out.

Given that crude is not just crude just like a car is not just a car and can be of many sizes, shapes and forms, I decided to go a little deeper.

The specific issue was to do with more expensive Russian crude which Indian refineries are not buying since they prefer the cheaper one, like the Urals. 

Because of which Bloomberg reports that several ships carrying the pricier Sokol crude have been stranded, for now, near Malaysia and South Korea. 

Why something is cheap and not is something we will come to in a moment.

The International Energy Agency points out that Russia produces several different types of crude oil, but its main export blend is Urals, which is a medium sour crude. 

Other grades include Siberian light, Sokol, Sakhalin blend, Arctic oil and Novy Port. Yes I know they sound like either vodka or beer brands and perhaps they even are or at least names close to them.

I reached out to Harsh Dole, vice president and oil and energy analyst at IIFL Securities and began by asking him to walk us through the different types of crude and how the price structure worked. 


US Steps Up Chip Subs Subsidies

We have spoken before of how Governments across the world are wooing chip giants to set up capacity in their countries with hefty subsidies and incentives.

To that extent, India too has to fight the same battle if it wants to pull in the big chip makers into India and they are not too many of them.

The U.S. government is giving chip maker GlobalFoundries $1.5 billion in grants to build and expand facilities in New York and Vermont, the first major award in a program that aims to reinvigorate domestic chip production, the WSJ is reporting.

The award from the Commerce Department kicks off what is expected to be a series of cash injections into semiconductor manufacturing projects in Arizona, Texas, New York and Ohio in the coming weeks. 

Chip makers Intel Samsung Electronics Micron Technology  have all submitted applications for the government to cover a portion of the billions of dollars it costs to build cutting-edge factories, according to the WSJ.

The grants, which have been under negotiation for months, are a cornerstone of the $53 billion Chips Act of 2022. 

Interestingly, the WSJ points out that this also comes at a time the chip industry seeks to recover from an extended downturn. Global chip sales fell 8.2% in 2023 to $526.8 billion, although the pace of sales picked up in the second half of last year.

Large chip makers like TSMC and Intel have apparently slowed construction on factories from their initial plans. The chip makers have said they are committed to finishing their projects, however.

Reliance Led Consortium For Domestic ChatGPT Service

A consortium backed by Mukesh Ambani’s Reliance Industries Ltd. and leading engineering schools are aiming to launch a ChatGPT-style service next month, Bloomberg reported..

The BharatGPT group, encompassing an arm of India’s most valuable company and eight affiliated universities, offered a sneak peek of the large language model Tuesday during a technology conference in Mumbai. 

In a video played before delegates, a motorcycle mechanic in southern India queried an AI bot in his native Tamil, a banker conversed with the tool in Hindi, and a developer in Hyderabad used it to write computer code.

If successful, the model — dubbed Hanooman after the half-monkey Hindu deity — will represent an advance for India in the accelerating race to develop potentially transformative AI technology. 

BharatGPT envisions the model working via 11 local languages in four main fields: health care, governance, financial services and education.