Investors Are Increasing Long Positions Ahead Of Election Results

The market has already priced in a BJP victory which is why most institutional investors are now mentally gearing up for an upset of any sort

29 May 2024 12:30 AM GMT

On Episode 304 of The Core Report, financial journalist Govindraj Ethiraj talks to London-based Arvind Chari, chief investment officer, Q India (UK) Ltd as well as Dr Viranchi Shah, national president of the Indian Drug Manufacturers Association (IDMA).

Our Top Reports For Today


(00:00) Stories Of The Day

(01:09) Investors are increasing long positions ahead of Election Results

(04:50) Foreign investors are looking at Indian debt differently from equity right now and amping up investments

(14:39) Indian drug makers have a strong year ahead with increase imports from countries like United States

(25:13) Toyota sticks to hybrid bet

(27:25) Weight loss drug sales projected to go from $24 billion last year to $138 billion in 2028 or in four years time

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 Subdued Even As Investors Increase Long Positions

Four trading sessions to go and the nervousness is picking up.

Remember exit polls for the General Elections 2024 will start coming out on June 1 that is the day after the last trading day of the week.

So how the markets will go on Monday June 3, the day before counting on June 4, is anybody’s guess.

Remember, as we have been saying, the market has already priced in a BJP victory which is why most institutional investors are now mentally gearing up for an upset of any sort, not because they believe it will happen, at least going by the conversations I am having, but it is their job to prepare for all eventualities. More on that in our new section View From London shortly.

Retail investors also seem to be piling on to the derivatives market heavily ahead of the results next week and more on that too in a moment.

So on Tuesday, the markets were fairly unsure and perhaps nervous and could that be the tenor for the next couple of days as well ?

Quite likely because I would think it's tough to talk up this market anymore as several politicians have already done. On the other hand, another bounce back or two is quite feasible.

This is because stocks have now dropped for the third straight day on Tuesday after hitting record highs of course.

The BSE Sensex which swung again in Tuesday trading between gains and losses through the day, closed near the day's low level at 75,170, down 220 points while the Nifty50 closed at 22,888, down 44 points or 0.19 per cent.

Retail investors seem to be making a bold bet in the derivatives markets a few days ahead of the Lok Sabha 2024 poll outcome, the Business Standard reported quoting NSE data saying they hold 52.79 per cent long positions in index futures as of May 27.

On the other hand, their net stock long position in the F&O segment stands at 89.72 per cent, which is the highest level five days ahead of the vote counting day since 2014 when the Narendra Modi-led National Democratic Alliance (NDA) assumed power for the first time in the general elections.

On the other hand, volatility levels are high. Business Standard reports the India VIX has spiked to 26 levels now as compared to 10.3 levels in April 2024, it is still much lower than the 35-odd levels seen in 2019.

Elsewhere, crude was quoting a little over $83 a barrel, even as Reuters reported that Reliance had struck a deal with Rosneft the Russian oil major for crude in rubles.

Reliance, one of the world’s largest standalone refiners, has signed a one-year deal with Russia's Rosneft to buy at least 3 million barrels of oil a month in rubles, said Reuters.

The shift to rouble payments follows Russian President Vladimir Putin's push for Moscow and its trading partners to find alternatives to the Western financial system to facilitate trade despite U.S. and European sanctions.

A term deal with Rosneft also helps privately run Reliance to secure oil at discounted rates at a time when the OPEC+ group of oil producers is expected to extend voluntary supply cuts beyond June.

Elsewhere, gold prices are now soft after investors started obviously booking profits as they are in other commodities as well.

Spot gold is around $2,343.99 per ounce below its 21-day moving average, which currently stands at $2,348, but was on track for the fourth consecutive month of growth with the 2.5% gain in May, says Reuters.

The London View

So how are Indian markets looking at this point from a slightly longer distance?

Before I go further, Reuters incidentally is reporting that foreign investors are increasingly being drawn to the traditionally overlooked rupee-denominated corporate debt market in India as they gear up for the inclusion of domestic government securities to a global bond index next month.

While current investments remain modest, four bankers and fund managers said they anticipate an uptick as more investors familiarise themselves with Indian debt instruments.

The point of course is that when you think of how FIIs are investing in India, think of both debt and equity since the country view is what matters, at least in the longer term context.

The US markets were closed on Monday and were steady overnight.

The US stock market is also, finally, as fast as it was about a hundred years ago.

That was the last time share trades in New York settled in a single day, as they will from Tuesday under new Securities and Exchange Commission rules. The change, called T+1, halving the time it takes to complete every transaction, also occurred in jurisdictions including Canada and Mexico on Monday, reported Bloomberg.

I reached out to London-based Arvind Chari, Chief Investment Officer, Q India (UK), Ltd and began by asking him how he was reading the mood for both debt and equity.

Why 2025 Is Looking Good For India’s Drug Manufacturers

Indian drugmakers, which have the U.S. market as a key segment, will sustain their revenue improvement in fiscal 2025 due to drug shortages in the United States, Mumbai-based India Ratings and Research said on Monday, in a report quoted by Reuters.

Roughly 50% of India’s $55 billion drug industry is geared for exports.

India is also a hub of bulk generic drug manufacturing and major drugmakers like Dr Reddy's, Cipla and Sun Pharma derive a significant share of revenue from both the U.S. and Europe, Reuters said.

But the US, the world’s largest drug market, is facing decade-high drug shortages, India Ratings said, citing data from Utah Drug Information Service.

There is an active shortage of 233 drugs across 22 therapeutic categories as of April, led mainly by discontinuing production of some drugs, rising demand and delays in shipments, it said, also citing data from the U.S. Food and Drug Administration.

Large Indian manufacturers are already reporting spikes in sales but what is the outlook for the industry as a whole.

I reached out to Dr Viranchi Shah, National President of the Indian Drug Manufacturer Association and also MD of Ahmedabad based Saga Life Sciences. IDMA was set up in 1961 and claims over 1,000 active members.

I began by asking him to give us a quick overview of India’s drug manufacturing industry and a sense on how exports were looking for this as well as the domestic market.


Toyota EV

Toyota Motor has showcased next-generation engines on Tuesday that can be used in cars as varied as hybrids and those running on biofuel, as it targets tougher emissions standards and doubles down on its strategy of selling more than just EVs, Reuters reported.

The world's biggest automaker by volume displayed in-development 1.5 litre and 2.0 litre engines with significantly reduced volume and height versus current engines.

"With these engines, each of the three companies will aim to optimise integration with motors, batteries, and other electric drive units," Toyota said alongwith Subaru and Mazda. Toyota owns about a fifth of Subaru and roughly 5% of Mazda.

The three said their efforts will help decarbonise internal combustion engines by making them compatible with alternative fuel sources such as e-fuels and biofuels. They also hope more compact engines will revamp vehicle design by allowing for lower hoods.

The larger point is, as is evident in India, hybrids are selling faster than electric ones right now.

Toyota has stuck to its guns on this one saying that fuel-burning engines have a role to play even as the industry shifts to battery EVs in a global push to decarbonize.

The Japanese manufacturers have long been criticised for hesitating to fully embrace electrification, while BYD Co. and Elon Musk’s Tesla Inc. take the lead in battery-based EVs, reported Bloomebrg.

Hiroki Nakajima, Toyota’s chief technology officer, declined to give a timeframe for when Toyota’s new engines would show up in its vehicles, but said the carmaker will make sure to have them in the market before stricter emission rules are enforced.

Toyota has long argued that multiple options will be needed to navigate the shift to electrification — an approach that it calls a “multipathway” strategy that offers customers a broad choice of powertrains, including hybrids, hydrogen fuel cells and combustion engines, as well as battery EVs, reported Bloomberg.

Many other car manufacturers including the German majors have echoed similar approaches.

Weight Loss Drugs Sell More

As millions seek access to weight-loss drugs from Novo Nordisk and Eli Lilly , increasing supplies, possible wider usage and a growing number of would-be rivals are leading some experts to raise annual global sales forecasts for the treatments to about $150 billion by the early 2030s.

A year ago, top sales estimates were in the $100 billion range.

There are no Indian numbers here that I have but the market here is growing as fast if not faster and is worth over Rs 400 crore already.

"It is very unusual to have a medicine that is capturing the imagination of millions of people," said Michael Kleinrock, senior research director at healthcare analytics firm IQVIA Institute for Data Science.

Global spending on obesity medications totaled $24 billion last year, IQVIA estimated in its latest five-year outlook, and could reach $131 billion by 2028. That 27% annual growth estimate compares with a prior projection of 13%.

Analysts cite recent data showing the self-injected drugs help stave off costly emergencies like heart attack and stroke or treat chronic conditions like sleep apnea, supporting the case for employers and insurers to pay for them.

Updated On: 29 May 2024 12:31 AM GMT
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