Markets Above 75000, Close To $5 Trillion Market Cap

• (00:00) Stories Of The Day
• (01:00) Markets Above 75000, Close To $5 Trillion Market Cap
• (03:06) Gold Prices Rise Further, So Does Smuggling All Over. Why Import Duties Should Be Cut
• (06:46) Hang Seng Rises Over 20% To Enter A Technical Bull Market. China Manufacturing Is On The Upswing
• (09:00) That Awful Deja Vu Moment At Air India When Unions Return To Flex Their Muscles
• (11:48) Why The Cost Of Chicken Could Go Up Dramatically

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.

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Markets Up To 75000

So the markets have closed above 75000, a mark it hit the day before.

Like we said yesterday, when the markets hit new highs and benchmarks, mature investors do look to take away some of the profits and wait to enter afresh.

When will that be, it's not clear right now. Logically, it would appear that the only time the market could see a bigger correction would be after the election results because it has already priced in a victory and continuity for the present regime.

We are already seeing some cut backs in mutual fund flows and I will come to that shortly. 

On Wednesday, the  BSE Sensex ended up 354 points at 75,038 levels, while the Nifty50 closed at 22,754, up 111 points.

The broader indices like the MidCap index and the BSE SmallCap index outdid better, though slightly. 

So the overall market capitalisation of firms listed on BSE rose to nearly ₹402.2 lakh crore from nearly ₹400 lakh crore in the previous session, making investors richer by over ₹2 lakh crore in a single session.

In dollar terms, we should be somewhere near $4.8 trillion or so and thus edging towards the $5 trillion mark in market capitalization.

Please do not confuse this with GDP numbers.

The consumer price index, a key inflation gauge, rose 3.5% in March, higher than expectations and marking an acceleration for inflation.

Shelter and energy costs drove the increase on the all-items index. Energy rose 1.1% after increasing 2.3% in February, while shelter costs were higher by 0.4% on the month and up 5.7% from a year ago.

Following the report, traders pushed the first expected rate cut out to September, according to CME Group calculations.

Gold Fever Spreads Across Globe

Gold is holding record highs and was little changed after closing at $2,352.78 an ounce overnight. 

More than the specific price right now, do note that gold has now rallied more than 18% since mid February. 

High prices and high duties are also leading to a slew of smuggling operations, including some obviously getting caught like a consignment in Hong Kong where authorities seized some $11 million of gold concealed as machine parts being shipped to Japan.  Some 146 kilograms of gold had apparently been “moulded and camouflaged” as part of two air compressors in the cargo of an aeroplane parked in the city.

India too is seeing a step up in smuggling as is evident from newspaper reports all over.

The common factor of course is high duties which encourage smuggling, anywhere in the world

Perhaps this is a good time to reduce duties on gold as has been done before. Gold coming into the country will stay here, even if it idles in safes or steel cupboards.

Central banks from China to India are buying up gold and so are, apparently, more retail consumers including in China.

So there is no clear let up in demand visible, except thanks to higher prices which is happening in India.

Oil Prices Decline Somewhat

Oil prices have slipped below $90 after it looked like they would take off towards the $100 mark, something oil speculators have loved but economists would have feared, particularly those in oil buying countries like India.

The American Petroleum Institute has reported crude inventories rose last week, with official government figures due later overnight, Bloomberg reported.

Mutual Funds Are Reporting Outflows

We mentioned mutual fund flows earlier.

March saw inflows into open-ended equity mutual funds seeing a 16 percent decline, amounting to ₹22,633 crore, as per data released by the Association of Mutual Funds of India (AMFI) on April 10th.

The total assets under management (AUM) of mutual funds decreased by 2%, amounting to ₹53.12 lakh crore, compared to ₹54.24 lakh crore in February.

Small-cap funds experienced an outflow of ₹94.17 crore. 

Throughout FY24, this category saw total inflows amounting to ₹40,188.56 crore.

Categories like MidCaps and Large Cap Funds saw lower but still positive inflows. For example, inflows into the large cap category surging by 131 percent to ₹2,128 crore in March.

Mutual funds continue to launch new fund offers, with some 19 open ended and two closed ended ones in March, adding close to Rs 4,000 crore. 

The breather is actually good and it was time anyway for investors to pull out some funds or rejig them as appears to be the case.

Mutual funds are still the safer way to invest in markets as opposed to punting directly.

Chinese stocks Continue To Bounce back

We have been tracking and reporting on China stocks for the last few months, first the fall and then the rise. We also called it, what goes down must come up.

Bloomberg is reporting that Chinese stocks trading in Hong Kong have now rallied to reach a key milestone as sentiment improved following upbeat economic data and corporate developments.

The Hang Seng China Enterprises Index gained 2.1% on Wednesday, taking its advance from a Jan. 22 low to more than 20% and thus entering a so-called technical bull market for the first time since China scrapped Covid controls in late 2022.

Chinese stocks have been recovering ever since Beijing took the fate of the markets in its hands including with purchases by state funds. 

Bloomberg says some global investors are starting to buy into the narrative that Beijing’s policy support will be enough to revive growth, with a popular equities strategy to “buy India, sell China” likely having reached an inflection point.

Elsewhere, Fitch ratings has cut its outlook on China's sovereign credit rating to negative on Wednesday, citing risks to public finances as the economy faces increasing uncertainty in its shift to new growth models.

The outlook downgrade follows a similar move by Moody's in December.

Meanwhile, an interesting report by economist Neelkanth Mishra and his team at Axis Bank says that the share of GDP from manufacturing in China is now rebounding after falling steadily between 2010-20 

Moreover, capital allocation to industry is up sharply which in turn could put pressure on returns globally, the report says.

When China had surplus labour, but lacked sufficient capital, it out-competed labour- intensive industries globally. 

Given its larger economic size now, its competitiveness in capital-intensive industries can now be a threat to industries globally, says the Axis Bank report. 

Moreover, not only is employment falling in labour-intensive sectors, but it is also rising in capital-intensive sectors (Fig 10).

The latter now dominate manufacturing employment in China (Fig 11).

Air India Deja Vu

This  is a deja vu that I never thought I would encounter, another strike being called in or around Air India after what seems like decades.

This is on the heels of two Air India pilot unions jumping into the Air Vistara pilot walk out fray just week before last. 

The fact that these pilot unions were active was news to me, though maybe people who track the sector more closely knew.

Unions have been the bane of Air India and have, along with poor management, taken the airline to the precipice and precisely to this position where it was bankrupt for all practical purposes.

At which point the Government finally managed to palm it off to the Tatas two years ago who of course must be regretting their decision with every passing day, at least privately even as they publicly put on a brave face.

Now the news is that aircraft technicians of the Government-owned Air India Engineering Services Ltd. have called for a strike on April 23 to seek resolution for their grievances, including about promotion, salary and uniform.

The company is still Government owned but Air India the airline which is Tata owned is the key client. So either way, the Tatas are in for some fresh trouble.

The union, which claims to have around 1,000 members, represents the Fixed Term Employment staff.

The union has a litany of grievances around notice periods, salary disparities, no revisions and even the lack of promotions.

And finally, the union is upset about what it calls  unilateral changes to uniform policies without prior consultations or consent and says the disparities in colour and quality of the uniform makes them feel insecure, undervalued and marginalised.

The arrival of unions on the scene is the worst possible news for Air India.

What the management must do and how it must respond if it even can is for another day.

Meanwhile, news of an airline where there are no unions at least visible to me.

The stock price of InterGlobe Aviation Limited, owner of IndiGOscaled fresh record high on April 10.

Moreover, Wednesday's gains made Indigo the world's third largest airline in terms of market capitalisation, says MoneyControl. 

The 22 percent rally in the last one month has taken the stock of InterGlobe Aviation, the operator of IndiGo airline in India, to over Rs 1,46,000 crore ($17.5 billion) in total value, Bloomberg data showed.

Data shows that Delta Air and Ryanair Holdings are the top two airlines with $30.4 billion and $26.5 billion m-cap, respectively.

Why India’s Non Veg Thali Prices Will Rise

A few weeks ago, rating agency Crisil has put out its monthly thali price or an Indian full meal plate saying the cost of  a home-cooked vegetarian thali increased 7 per cent in March to Rs 27.3 compared to Rs 25.5 in the same month in 2023, said a report on Thursday.

On the other hand, a “non-vegetarian” thali’s price decreased 7 per cent to Rs 54.9 from Rs 59.2 in the same period, said the report by rating agency CRISIL. 

A vegetarian thali comprises roti, onion, tomato, potato, rice, dal, curd, and salad. A non-vegetarian has the same foods but chicken (broiler) replaces dal.

Now, food inflation would have been higher if broiler prices rose the same way, let's say vegetable prices did, which are holding around 30% inflation levels and pulses are around 19%.

But broiler prices are already inching upwards and are set to shoot up further.

Broiler or chicken prices are seeing their own demand and supply forces. Demand includes more young people eating in or ordering from KFCs and McDonalds while supply forces range from rising cost of feeds like soymeal.

I reached out to Ricky Thapar, treasurer of the Poultry Federation of India and began by asking him if it looked like prices were set to rise further and why.