On Episode 935 of The Core Report, financial journalist Govindraj Ethiraj talks to Sachin Sawrikar, Managing Partner at Artha Bharat Investment Managers. We also feature an excerpt from our latest episode of How India’s Economy Works, featuring Electrical Engineer Sudhir Gera, Director of Operations at IEC Electric Power Ltd.

SHOW NOTES

(00:00) Stories of the Day

(01:00) India’s Contrast Between Weak Macros And Strong Micros

(04:00) IT Stocks Pick Up Pace As Investors Sell Off Global AI Majors

(05:19) Did Apple Miss Out On The AI Boom Or Stay Away From It, A Question Every Business Leader Should Ponder

(07:17) India Is Holding Back More Solar Power As Capacity Exceeds Transmission Infrastructure

(08:41) 46% Of NRI Property Owners In A Survey Are Looking To Sell Their Properties Immediately

(10:23) How Are Investors Responding To GIFT City Based Funds?

(18:22) How Are India’s Engineering Colleges Disconnected From The Job Market?

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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 feedback@thecore.in.

Good morning, it's Thursday the 30th of July and this is Govindraj Ethiraj, usually broadcasting and streaming weekdays from Mumbai, India's financial capital, but still in transit.

Our top stories and themes…

India's contrast between weak macros and strong micros.

IT stocks pick up pace as investors sell off global AI majors.

Did Apple miss out on the AI boom or stay away from it? A question every business leader should ponder.

India is holding back more solar power as capacity exceeds transmission infrastructure.

How are investors responding to GIFT city-based funds?

How India's engineering colleges are disconnected from the job market?

And 46% of NRI property owners in a survey say they want to sell their properties immediately.

Markets, IT Stocks, AI and Apple

It's an old dichotomy which has resurfaced in a new context. Businesses are doing well or better, but India's macro indicators are not looking very good. A new report from Kodak Institutional Equity says the strong first quarter results season so far and consequent earnings upgrades contrast sharply with India's weak macroeconomic situation in the same quarter.

That's the first quarter of 26-27. On the other hand, economists, as we mentioned yesterday, say the country's economy continues to rely heavily on government spending and remain concerned that the official figures overstate the actual strength of the economy. Economists in a Reuters poll said while investment in inventory accumulation supported growth measurement distortions have likely flattered the real growth outcome leaving the headline print stronger than the underlying macro reality.

Now Kodak the brokerage says they have more comfort with earnings outlook for the next year despite the macro pressures which include higher crude prices and more currently deficient rainfall. Kodak says the strong first quarter results and better than expected results in several sectors should provide greater comfort to the market's earning outlook. In keeping with that the brokerage expects fairly robust growth in net profits of the nifty 50 as well as their own universe of stocks thanks to a low base in some sectors continued strong activity in others and higher year-on-year commodity prices.

The brokerage is also taking solace from a sharp increase in industry credit across sectors and jumps in investments in areas like value-added manufacturing and chemicals electricity and electronic chains all helped by supportive government policies. Aggregate market valuations have been pulled down by the sharp derating in the multiples of banks and IT services according to the report. Now speaking of IT services the sectors obviously had a good run in recent days the nifty IT pack was up for the fourth consecutive session on Wednesday up close to 10 percent in four days with most of the major stocks in IT gaining.

So is the AI frenzy finally winding down and thus providing some tailwind to Indian IT company stocks? Well there are some early indications to that effect and I'll come to that but equally while there is some winding down as we've seen and reminded ourselves tech stocks can swing quite wildly and single session moves can make or break an entire year's gains and more on that in a moment. On Wednesday the markets were strong despite the rising crude prices and I'll come to more on that the sensex was up 889 points to 77 655 the nifty 50 was up 265 points 24 250 crude oil prices jumped on Wednesday after U.S. President Trump said the United States will hit Iran hard in retaliation for an attempted surprise attack on American forces in the Middle East. Neither Iran's moves or the U.S. retaliation are of course a surprise given how things have been shaping up on a week to week or well week to weekend basis.

Rent crude futures were up about seven percent to just under ninety dollars a battle at about eighty nine dollars ninety cents on Wednesday. Trump told Fox News that Iran is going to get a beating after the Islamic Revolutionary Guard Corps launched ballistic missiles at U.S. forces. Iran apparently targeted a U.S. base in Jordan.

Now to the AI unwind if so. The world's biggest chip stocks have seen more than a trillion dollars wiped out from their market capitalisation this week thanks to investor jitters. The seller was led by NVIDIA which saw roughly 238 billion dollar fall since market close on Friday.

SK hynix samsung electronics and micron all major players in the memory space lost over 150 billion or 176 billion to be precise and micron lost about 113 billion according to a CNBC report. The Philadelphia semiconductor index or SOX which tracks the 30 largest U.S. traded companies in the chip sector rose 92 percent in the last 12 months so this is despite the 20 percent over the past month. Specifically 20 of the world's most valuable chip stocks lost 1.3 trillion dollars since market close on Friday according to a CNBC analysis using fact set data.

On the other hand South Korea's stock market has fallen something like 44 percent in 40 days erasing about two trillion dollars in market cap according to the KubeC letter. Remember not too long ago it had overtaken India in market cap to become the sixth largest in the world of course riding mostly on two stocks Samsung and SK hynix. Also worth keeping in mind the letter points out between December 25 and June 26 South Korea's stock market rose 135 percent.

And here's the other interesting part which bears repetition or is worth repeating only to demonstrate what matters more even in the medium term. Now Apple on Tuesday briefly hit a market capitalisation of five trillion dollars for the first time a day after passing NVIDIA to become the most valuable publicly traded company. But the story is not about the market capitalisation peak.

As a report in CNBC says while the hyperscalers Alphabet, Amazon, Meta and Microsoft are collectively pouring hundreds of billions of dollars into capital expenditure this year for their AI build outs Apple has not just kept its capex spending low but is actually or perhaps wisely using cloud infrastructure and AI technology from Google. Apple's stock price of course is up 25 percent this year outpacing all the other mega cap peers. Earlier investors worried Apple was missing out on the AI boom by keeping investments in check and delaying the long awaited rollout of an upgraded CD which will now or is promised to be released this year.

But that narrative says CNBC has flipped off late due to concerns that the aggressive tech spenders are raising lots of debt and going cash flow negative without a clear path to good returns. So did Apple stay away from the AI frenzy by accident or design? Well you can decide for yourself in October 2025 almost two years ago Apple said that instead of simply buying as many AI chips as possible it buys computing capacity from outside partners according to its finance chief or CFO Kivan Parekh while speaking in an earnings call that year. When Apple does build servers for its AI software it uses its own chips not those from NVIDIA or AMD to power a service it calls private cloud compute.

Parekh had then said that he does not see or he did not see Apple moving away from this hybrid model where we leverage both first party capacity as well as leverage third party capacity. So Apple does seem to have stayed focused on building its core competencies and not building infrastructure. So it is to some extent by design and therefore suggests considerable business focus and conviction something to take away for today.

India’s solar power as capacity exceeds transmission infrastructure

India has held back something like 8000 gigawatt hours of solar power for the April to June period as the grid struggled to absorb renewable electricity thanks to transmission bottlenecks and grid security requirements according to a government statement on Tuesday quoted by Reuters. Solar power curtailment stood at roughly 2400 gigawatt hours in April, 3200 gigawatt hours in May and 2480 gigawatt hours in June according to a statement by the Minister for Renewable Energy. The problem is of plenty the new clean energy plants are coming into operation ahead of schedule and delayed transmission projects are forcing these power output curtailments something that we've discussed on the core report in the past as well.

So the government says that curtailment and restrictions on solar generation were being carried out to maintain grid security and because of a mismatch between the commissioning of transmission lines and renewable energy projects. Meanwhile India's road minister Nitin Gadkari said on Wednesday that some BS3 vehicles manufactured before 2016 may require certain rubber parts and gaskets to be replaced when operated on E20 petrol or ethanol blended petrol though studies he said had not found any major impact on overall vehicle performance. He also said that such replacement of these rubber parts and gaskets could be carried out as part of the vehicle's routine servicing.

NRI property owners want to sell their properties

Some 46 percent of non-resident Indian or NRI property owners surveyed are looking to sell their properties immediately and another 26 percent plan to exit within six months suggesting a shift in how NRIs are looking at their real estate assets in India. At the same time more than half intend to transfer the sale proceeds overseas instead of reinvesting in Indian real estate according to a remitted annual NRI wealth report 2026 reported by the business standard. The report by the Vancouver based wealth tech startup Remitor suggests that properties purchased during India's biggest NRI buying cycle between 2010 and 19 are entering what it calls a liquidity phase with owners increasingly viewing them as financial assets rather than emotional anchors.

More than 60 percent of the properties entering the resale market were acquired during that decade. 89 percent are residential homes and that also suggests that apartments bought in those years are now being monetised.

How are investors responding to GIFT city-based funds?

Artha Bharat Investment Managers is one of the larger fund management companies operating from the International Finance Centre at Gift City near Ahmedabad. It manages assets of about 750 million across several alternate funds including one on stressed assets.

Artha is now launching what it calls the first ever physical commodity fund and the first gold fund to be launched from Gift City. The scheme is designed to track international spot gold prices allocating at least 95 percent of assets to the London Bullion Association standard gold bars traded on Gift City's India International Bullion Exchange which is a joint venture of the NSC, NSDL, CDSL and MCX and the BSC subsidiary that is the Indian Exchanges. I reached out to Sajjan Savrikar managing partner at Artha Bharat and I began by asking him about his outlook for gold given how markets had flattened out off late but also what his experience in running a Gift City based fund so far was and some takeaways.

INTERVIEW TRANSCRIPT

Sachin Sawrikar: So we actually shifted to GiveCity from Mauritius. So we had a Mauritius fund. The government and the regulator here encouraged and provided incentives for funds to shift which were investing in India from any other jurisdiction to GiveCity.

And they made it tax neutral for us. So it made a lot of sense for us to shift because our key challenge was the diversity of our investors. So being an FBI, Indian origin investors cannot be more than 50%.

SEBI allowed any fund which comes from GiveCity to have 100% Indian origin investors. So for that was very beneficial for us and that made a shift from Mauritius to GiveCity. And that fund is a $600 million fund.

So it made phenomenal returns. It used to do, it still does what you call as a distress credit space. So we buy bad loans through ARCs in the form of security receipts.

So we made 6X returns in about three years in that fund. So our investors are obviously very happy and pleased with us that it's a close-ended fund. A lot of people want to join it but it's too late now.

So now we launched furthermore about four funds, other funds, which is a US hedge fund. So we are one of the first or very few funds which is in GiveCity which has an external investor that is non-resident investors investing in US markets. So it's neither an inbound or not an outbound investor.

So very few which are just domiciled in GiveCity for non-resident investors. So that's our US hedge fund. It's about $100 million.

It's done fairly well now. It had its own ups and downs but last six months have been very good and consistent returns have been given in that.

Govindraj Ethiraj: Yeah, if I can supplement the earlier question. So what's your sense on the way investors are viewing the GiveCity route? And I know this is a sort of more broader question and how investors are looking at the GiveCity route since it's become more active?

Sachin Sawrikar: If you ask me the non-resident investors are not very positively still viewing GiveCity. I think there is still a lot of paperwork, a lot of like, you know, they ask you for a PAN card. You know, everybody is wary about giving you a PAN card to invest in India.

So they feel like they are investing in India while actually it's not investing in India. Then they ask, the next question to ask is why then why do you want a PAN card? Every investor who is outside has had some trouble with the Indian tax authorities and nobody is comfortable with this, you know.

So that's the reason why we are also considering shifting this hedge fund from GiveCity to our Abu Dhabi jurisdiction that is opening up shortly because no investor wants to invest in this fund in India. But for investors from India who wants to invest outside, I think this has become a very favourable jurisdiction. A lot of people are looking at this.

While still the tax, there is no tax benefits for investors from India investing through GiveCity. There's a reason why we are structuring master funds outside with feeder funds in GiveCity, which is a loss for the jurisdiction because the core investment activity is happening outside.

Govindraj Ethiraj: Okay, so let me ask you about the physical gold fund. So obviously gold prices are down quite sharply from their peak and they're all around now about $4,000 an ounce after having touched over $5,000. So how are you seeing and or rather what's the outlook looking like?

Sachin Sawrikar: See the gold story is it's not over. I mean honestly I mean it's just that you know we had a sharp rise right less than $3,000 to $5,500 in less than two years. That's a phenomenal rally.

Obviously we expect 25 to 30 percent of correction from that. It's a very healthy move. It's been consolidating around $4,000 for a while now.

A lot of people still feel that it might go down a little bit but I think it is closer to the fair value than it is at this level and we feel that it's a good entry point for investors. While we don't recommend a very substantial allocation to gold because it's a non-yielding asset but it's a good asset to own.

Govindraj Ethiraj: Are you sort of targeting it at any particular kind of investors? You know for example a few months ago everyone was let's say moving into gold and silver for that matter and because it looked like it would be a hedge against equities which have been and continue to be somewhat flat. So what's the kind of investor in terms of behaviour class that you're looking at now and or seeing as you open this up?

Sachin Sawrikar: It's a typical investor behaviour you know when any asset class prices is moving sharply everybody wants to be in that asset class irrespective of what price they want to enter in but now at $4,000 people are very saying that you know there is more correction coming. I don't think you know we should really look at timing the markets. I mean everybody now is doing two systematic investment plans so it's a good idea to keep buying at this accumulate at this level.

So in terms of the investors that we're looking for are those who want to diversify or have some sort of a portfolio stabiliser in their portfolio. There is almost zero correlation between stocks and gold prices and it's an inflation hedge. So if you want to have five to ten percent allocation into this asset class it's a good vehicle to have and what we are offering is the fact that you know we are true tracker with 95 percent physical gold that we are going to hold in the vault and we are offering our investors the confidence by saying in case you want to redeem you can take the gold not just by you know redeeming the value.

Govindraj Ethiraj: So when you say physical gold but don't all funds into particularly ETFs also have a physical gold backup?

Sachin Sawrikar: Not necessarily they would have through derivatives not necessarily physical gold as a backup. Substantial amount comes through derivatives.

Govindraj Ethiraj: Even in India?

Sachin Sawrikar: In India I think recently people are talking about you know until now I think to a large extent most of them were physical gold but some of them now we're being allowed to hold derivatives. Many of them are saying they'll hold derivatives rather than physical gold. It's easier but then again there's a tracking error in there always.

Govindraj Ethiraj: Got it. Just to come back to the portfolio of funds that you're managing. So when you look at let's say the work that you've been doing in distressed credit or derivative based strategy.

I mean you did say that one of your funds had done 6x. But what's the overall sense that you're getting in terms of where let's say the more interesting opportunities are in the Indian market and the approach to it?

Sachin Sawrikar: See last two years Indian markets have gone nowhere because globally the theme and the fact that FBIs have been withdrawing money since the time the long-term capital gains have been increased and the rotation has happened mostly outside into AI theme, semiconductor theme. So those themes are not available in India today. So a lot of money has gone out.

At the same time whatever themes which we have in India which are related to the economic growth that we expect whether it is the banking sector most of the stocks are trading at a good attractive valuation. Even the tech sector I mean while people say you know that LLMs will come and kill the tech industry but I think you know a lot of such stories have come in the past. While they will definitely improve the productivity I don't think that it will be such a disruptor.

Govindraj Ethiraj: Got it. Sachin thank you so much for joining me.

Sachin Sawrikar: Thank you so much for having me. Look forward to more interactions.

Govindraj Ethiraj: Likewise.

India’s Engineering Crisis

Going beyond the recent student protest the attention is back to India's job market and prospects for young graduates. India's engineering graduates are particularly in focus. Pooja Mehra who hosts how India's economy works also on the core spoke with Sudhir Gera of IEC Electric Power who has worked across policy and regulation in this space.

Gera's key argument there is no medical college without a hospital so why are engineering colleges functioning without a link to industry? He says India's engineering colleges remain mostly disconnected from manufacturing creating a major skills gap even as India pushes to become the factory of the world. He also argues that 80 to 90 percent of engineering recruitment happens in information technology services leaving manufacturers struggling to find talent. The core problem is the lack of linkages between academia and industry and thus he says India's challenge is not a shortage of engineering graduates but a shortage of industry-ready skills.

INTERVIEW TRANSCRIPT

Sudhir Gera: We have a shortage of execution readiness. We do not have any execution readiness.

I'm taking you back into the history. Post-independent, we have something like 60s, some which I read from net only, that there were some 3,000 engineering seats only. And today it's like 15 lakh engineers are coming out.

Now, the major shift which India has seen in near 95 to 2000, when this 2K crisis has come, then India was going into IT segment, telecom segment. India felt that we should have more engineers. But then the government then thought of it that they cannot have so much engineering colleges and talent they can attract really.

So they have gone for privatisation of more engineering colleges. It was earlier in Bangalore or South, then they expanded into all of the India. Then after this expansion, IT and telecom did a fantastic job.

When we started a journey of 2000, they did a fantastic job. And those engineers, they served in those segments and all were absorbed there. But during that journey, one of the aim was to support MSMEs also for basic engineering, electrical, mechanical, electronics industry also.

But somehow those white-collar jobs have actually given a backseat to these domain areas. And somehow they have started attracting other domains than IT or telecom to these segments. I mean, electrical, mechanical or civil or chemical even, they are eligible for getting a job into IT and telecom.

Now, when I am using the word crisis, so how we reach to this crisis is that IT sector has a lot of training budget with them because for them, it is a raw material. Students are raw material for them. They have a basic knowledge, they train them according to their needs and then use them as per their requirement.

But when we talk about MSMEs industry, they don't have that much merchants. IT and telecom have those much margins to train them because that is a raw material. And when I talk about industry, which is manufacturing, they cannot afford.

So there the radius is not there for domain areas. And MSMEs cannot afford them if they do not have a talent, if they do not have skills. Because they even can't train, they can't afford the training to them also because they don't have that merchants.

So what finally went into a crisis is that MSME industry especially, or I will say manufacturing industry has gone into a vacuum where there is no skill. Now, everybody want to go to IT, everybody want to go to a segment which is white collar job, more money and more salaries, more work-life balance is there. So those were all attractions there.

So mechanical shop, civil construction, electrical substation, all these have become a big vacuum where we could not get any right skill.

Puja Mehra: You're essentially saying that because the IT sector has very high profitability margins, they're able to afford the cream of the students that come out of engineering colleges, regardless of their specialisation and they are able to spend money on training them for their requirement. And the remaining students that are there in the market for MSMEs such as yours to absorb in mechanical and other streams, you don't get ready for the job to be done on your shop floor kind of students. And you also do not have the profitability margins to retrain them for your purposes.

Sudhir Gera: I say not retrain, even train. Even for readiness of industry, which manufacturing industry is looking for, we don't have that much infrastructures to train them. That's a big infrastructure is required because it is not an IT training sitting on a laptop, something you will do it.

They are coming from a conventional labs and I'm having a working shop floor. There is a hell of a difference. But the difference between IT is a laptop to laptop.

Puja Mehra: What is the campus reality like? What are colleges fundamentally missing here? Are students being left behind by outdated curriculum or they're out of sync with what the industry's requirement is on skill development?

Is that what's happening? Campuses here are what is the bottleneck?

Sudhir Gera: The problem is now become very complex. We are talking after a year when AI has come. I think that before AI era, still the problem was solvable.

But now it has become too difficult to solve this problem. I mean, we all have to sit together. I mean, industry has to sit together, engineering colleges have to sit together and the government has to sit together to understand where are the gaps and how to fill these gaps.

Now, I have extended my discussion on this, more crisis in manufacturing. Today, you know, Puja, in India, mostly we are assemblers now. We are not manufacturers.

Either you take LED TV, either you take air conditioning, either you take any product today, we are assemblers. We take some chips from outside, technology from outside, some component from outside, body we make, software we make, but we are basically assemblers. We are not manufacturers.

Hardcore manufacturer is hardly 10% in India. Do you agree with me this or not?

Puja Mehra: Yeah, in fact, it really struck me when you said the other day to me that we don't have a single homegrown manufacturing brand of this nature. We don't even make washing machines in this country.

Sudhir Gera: I mean, those are brands are there. I will not say there are few, few brands are not there, but you know, it will be interesting in those brands also components are used, are imported. We are not manufacturing the components also in those Indian brands.

Puja Mehra: In fact, we are highly dependent on imports.

Sudhir Gera: Highly dependent, highly dependent. And what is the reason for it? That we are not, our total ecosystem is not prepared for that.

I will not say it is only engineering colleges, which are responsible for against total ecosystem. Mindset of industry, mindset of engineering colleges or universities or education system, I will say. And definitely the government, which is taking care.

All this ecosystem need to correction. And I will appreciate that government has taken a lot of steps in the last 10 years. I will not say that they are not taking the steps.

See, in Japanese, they have a course with them, what they call as KOSEN some of their languages, which I was reading. That from age of 15 years to 20 years, they only train engineers for manufacturing industry.

Puja Mehra: Especially when you look at manufacturing from the lens of employment, which is what India needs to do.

Sudhir Gera: Oh, you can do something in chip manufacturing. You can do something for a mechanical point of view. They only deal with these courses in pure going, sending the students for manufacturing industry and they take the feedback from manufacturing industry.

And then they do those courses there and everything. They have a very, very less bookish syllabus in that curriculum for that. So that is what they call is a Japanese KOSEN.

So they were only trained for them. Now, apparently when I see in India, there is some scale ministry has come out, scale university has come out. I will not say that India has not taken steps.

I appreciate those steps are there. But now again, my query is that how to build that ecosystem between scale university, students, and then again, what industry is looking for. So this is now the biggest in scale university in India.

You know, Puja is stigma, social stigma. I am working for a blue collar job. I have to work with my own hands.

That keeps this course as a second level of course, not first level of course. If you don't get a right B.Tech college and you are then again born into this university, that is scale university. That is something which I have found that nobody's preferring as a first level of course.