Markets Bounce In Fag End Of Trade
For the second time in recent trading days, the stock markets reversed course towards the end of the trading day.
On Episode 597 of The Core Report, financial journalist Govindraj Ethiraj talks to Ayaz Memon, veteran sports journalist and commentator.
SHOW NOTES
(00:00) Stories of the Day
(01:00) Markets bounce in fag end of trade as they grapple with uncertainty
(02:16) Foreign brokerages are still wary of high valuations
(04:51) US Dollar Index will fall 9% says Morgan Stanley
(07:17) Maruti wants the Govt to step in to revive small car sales, Tesla is a no show
(11:03) Gulf and Indian airlines exchange terse words on bilaterals at IATA summit in Delhi
(14:02) IPL 2025 ends today. The journey so far and ahead
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 Tuesday, the 3rd of June and this is Govindraj Ethiraj broadcasting and streaming from our headquarters in Mumbai, India's financial capital.
The top headlines and themes.
The stock markets bounce in the fag end of trade as they grapple with uncertainty.
Foreign brokerages are still wary of high valuations in India.
The US dollar index will fall 9%, says Morgan Stanley.
Car major Maruti wants the government to step in to revive small car sales and Tesla seems to be a no-show.
Gulf and Indian airlines exchange terse words on bilaterals at the IATA summit in New Delhi.
And the IPL 2025 ends today. The journey so far and ahead.
The Big Bounce
It's something about the last few minutes of play when bulls and bears seem to trade places depending on where they started from, of course. For the second time in recent trading days, the stock markets reversed course towards the end of the trading day. That's on Monday, July the 2nd.
By the way, speaking about play, we have an IPL update later on in the show. Back to a different pitch, the markets are still seeking direction and a balance point between the internal positives and external negatives, mostly on the tariff front, which of course brings new surprises almost every other day now, the latest being the 50%, which is a doubling of tariffs on steel and aluminium imports into the United States. The stock markets were still lower on Monday but recovered from lows during the day.
The Sensex closed at 81,374, which was down 77 points, but the day's low was 719 points. The Nifty 50 closed down 34 points at 24,717. There are of course multiple angles weighing in on the markets between domestic and global, but usually markets swing for one or two key reasons in either direction.
That reason could also include flows when there is no other strong motive force. So it's a general sense of listlessness. Meanwhile, the broader markets were higher with the Nifty mid cap and the Nifty small cap indices closing about 0.6 and 1.1% higher. So foreign brokerages are broadly positive in India and emerging markets but are constantly reiterating their caution for reasons now we know. A report in Business Standard says that analysts at Nomura have revised their March 2026 Nifty target to 26,140 from their earlier 24,970, while Bank of America Securities has not made any change to its year-end Nifty target. The Nifty, Nomura said, is currently trading at a 20.5x one-year forward earnings, which is near the high end of its trading range over the past three years. According to them, the favourable spread between earnings yield and bond yield at minus 1.4%, which is at the high end of the range that prevailed over the last four years, is comforting. Now, the Nomura analyst says that based on a 21x price-to-earnings or 21x price-to-earnings on 2627 earnings, that next year, they will have arrived at their March 2026 Nifty target of 26,140. Bank of America, meanwhile, said or rather pointed to India's ongoing monetary stimulus, which would help revive India's gross domestic product or capex or consumption growth, according to Business Standard.
Now, Bank of America is not betting all that much on this, calling it a shallow revival. Notably, it says that given the recent rally, it sees no upside to their Nifty year-end target of 25,000. Interestingly, Bank of America also says that markets are now fully pricing in an imminent India-US trade deal, leading to India being a key beneficiary of shifting global supply chains.
However, any global slowdown amidst the ongoing trade war is not priced in as yet, which of course seems logical going by the relative strength in the markets. Bank of America also says that with the recent market rally, relative return potential for Nifty has become unattractive for foreign institutional investors versus US treasuries, which are at about 4.3% and the equity risk premium, and therefore, they see some risk to FII flows going forward. So, the risk is really how US bond markets perform, as we've been noting since the April 2nd tariff announcement started.
Nomura, like others, prefers domestic focus sectors to exporters, given the global uncertainties, and prefers consumption to investment themes, though also says that the investment cycle is likely to be delayed because of global uncertainties, particularly in private capital expenditure, as we've been seeing and noting in recent months. Nomura also says it likes what it calls supply chain relocation themes like autos, pharmaceuticals, chemicals, and electronics. Meanwhile, financials, consumer staples, autos, discretionaries, oil and gas, power, telecom, internet, real estate, and select domestic healthcare plays are some of their top bets.
Now, on to bonds and currencies. The dollar will fall to levels last seen during the COVID-19 pandemic by the middle of next year, according to predictions by Morgan Stanley and reported by Bloomberg. This could be triggered by interest rate cuts and slowing growth.
The US dollar index will fall about 9% to hit about 91 by around this time next year, strategists at Morgan Stanley said in a note released on the 31st of May. The dollar, as we know, has already weakened this year and has fallen about 10% since its peak in February. Morgan Stanley said that they think rates and currency markets have embarked on sizable trends that will be sustained, taking the US dollar much lower and yield curves much steeper after two years of swing trading within wide ranges.
Bloomberg also quoted JPMorgan Chase saying that they remain bearish on the US currency too and instead recommending bets on the yen, euro, and perhaps you've not heard this before, Australian dollar. Still, the bearishness is far from historical extremes, underscoring the potential for more dollar weakness ahead. They quoted data from the Commodities Futures Trading Commission saying Morgan Stanley says the biggest winners from dollar weakness will be the euro, yen, and Swiss franc.
It also said that 10-year treasury yields will reach 4% by the end of the year and stage a much larger decline next year as the Federal Reserve delivers 175 basis points of rate cuts.
Gold Prices Rise
So in the midst of all this, gold prices are now once again rising as strength uncertainties have increased in recent days. Let's look at the India prices. Gold prices on India's multi-commodity exchanger MCX were up about Rs 1,630 per 10g to hit about Rs 97,505 on Monday's commodities market session, according to a report in Mint.
And finally, oil prices, which we've not really referred to in the last few days, have jumped about 4% on Monday after the Organisation of Petroleum Exporting Countries kept output increases in July at the same level as the previous two months, so there was some expectation that it would increase. Brent crude futures were up about $2.2 to $65.06 a barrel, while West Texas Intermediate Crude was up about $3 to about $63.78 a barrel. So $65 a barrel of Brent crude is where we are right now.
Maruti Makes A Pitch
Maruti India's largest car manufacturer wants the government to intervene to revive small car demand in India. Maruti, of course, depends considerably on small car sales for its own health.
The company said on Monday that demand is not improving because of affordability issues and financing bottlenecks, which is stopping people from upgrading to four-wheelers from two-wheelers, according to a report in Business Standard. Now, this state of affairs is not new, with auto dealers having told the core report for almost a whole year that this is what they were experiencing at their showroom. Meanwhile, the average cost of cars has also gone up, as we've been noting here, from about 6.5 lakh rupees about four to five years ago to about 11 lakh rupees now. That's the average cost. Maruti's senior official said that if they keep big cars and small cars on the same table, affordability will be a huge issue, adding that while there are enquiries, conversion is a concern because of affordability and financing constraints for probable customers in this bracket. Financing has been an issue independently as well, with the Reserve Bank of India making it tighter for non-bank finance companies and banks to lend to consumers, including for auto loans.
Meanwhile, Maruti said that China's export curbs on rare earth magnets would not hit them and said that there would be no immediate production impact. Other manufacturers have been saying across other industries too that they were expecting problems here. China controls over 90 percent of global processing capacity of these magnets which are used in automobiles, home appliances and clean energy.
Meanwhile, the Economic Times reported that India's heavy industries minister said that Tesla now only wants to open showrooms and sell imported cars and thus presumably not manufacture here. Of course, this is something the core report has been actively pointing to and perhaps predicting for more than six months now. Other EV makers like Skoda and Kia are amongst the old companies with new EV entry plans, while Vietnamese car maker Vingroup is stepping up with its newer manufacturing plans and plants.
India's electric vehicle market is growing, with EV passenger sales going from about 5,000 units in 2020 to about 113,000 units in 2024, according to that ET report. That makes it about three percent of total car sales, but the government wants to take it to about 30 percent in about five years' time.
Mumbai's Unsold Real Estate
As many as 8,420 luxury units or flats priced over 2.5 crore rupees are lying unsold in mainland Mumbai as of Q1 2025 end, which is where we are right now, as against 6,180 units in the same period in 2024, according to a report from Anarock, which is a real estate consulting firm. This is apparently the first time since 2022 when unsold stock in the luxury segment has seen a yearly increase, and that figure has risen 36 percent year-on-year. Back in Q1 2023, there was a 29 percent yearly decline in luxury unsold stock in Mumbai from approximately 18,340 units to about 13,040 units as of the end of the first quarter of 2023.
Average ticket price of properties in the Jan to May period at about 1.59 crores is highest in the last seven years, according to Anarock, indicating the sales of high-priced ticket homes.
The Big Bilateral Dogfight
The battle is an old one, but fresh shots have been fired at the ongoing International Air Transport Association meet and Annual General meet in Delhi right now. The president of Emirates Airlines, Tim Clark, first said that restricting air access for foreign airlines by not increasing bilateral rights was akin to shooting yourself in the foot, referring to India, not increasing bilateral rights for Emirates. Indigo CEO Peter Elbers reported by saying that bilateral air service agreements are meant to be mutually beneficial and that making more noise doesn't make one right, according to a report in Business Standard.
He said that, first of all, it's called a bilateral agreement, right? That means two sides have to agree on something. If one side makes more and more noise, it doesn't mean that you're more and more right.
Air India CEO Campbell Wilson said something similar last year that giving more rights to countries like the UAE would be like pulling the rug out from under Indian Airlines, which have placed orders for more than a thousand new aircraft. Without naming any specific country or region, Elbers said that there have been historically several international markets where foreign airlines have fully utilised their entitlements to fly into India, while Indian carriers did not, presumably he means could not. There were a massive number of flights into India, no operations by Indian operators.
So for a government to say, first, let's use the existing pool of traffic rights and then look at the new ones, he said is a completely fair and balanced approach. The UAE has been urging India to revise the 2014 bilateral agreement, which caps seat entitlements to about 66,500 seats per week for each side. Emirates has already exhausted its allocation and has repeatedly expressed frustration for not being allowed to add more flights.
So, Middle Eastern hubs like Dubai, Doha and Abu Dhabi primarily channel Indian traffic onwards to North America and Europe, which is why they're so successful. Interestingly, while India's government has held back on allowing Gulf carriers to hike capacity for some years, it's only now in the last year or so that Indian carriers have demonstrated a considerable ramp-up potential not seen before. India, meanwhile, has been expanding bilaterals with other countries, ranging from Russian carriers to South Korea and the United Kingdom.
So, more flights to London. Meanwhile, other insights from IATA's meeting in Delhi, Bloomberg reports that IGSA, which owns British Airways, has said that weaker demand on transatlantic routes has shown signs of easing over the last three weeks as travel outlook begins to stabilize following a period of uncertainty. Some airlines saw a decline in travellers flying between Europe and the United States after the tariffs were imposed on countries around the world.
IAG, Air France, KLM and Deutsche Lufthansa AG all previously said that the weakness was more noticeable on their cheaper seats, while demand for premium travel remained robust, according to that Bloomberg report. British Airways noticed several weeks of demand softness in its economy cabins from the US, though the situation is now recovering, IAG CEO Louis Gallego said on Monday to Bloomberg. Some corporate travel also slowed after the US announced tariffs and business passengers delayed some travel as a result, he said.
IPL, Next
The long IPL cricket season, which started on March 22 and would have ended earlier but for the conflict on the border, will conclude this evening with the finals between Royal Challengers Bangalore and Punjab Kings. I reached out to Ayaz Memon, veteran cricket and sports journalist and commentator and I began by asking him about the journey so far and his outlook for the match today.
INTERVIEW TRANSCRIPT
Ayaz Memon: There's KKR which has won it thrice and the other teams have been struggling to even reach the final. Royal Challengers Bangalore has been in the final thrice, never won it and Punjab have been struggling to even reach the knockout. This is after 11 years, they're in the knockout stage.
So, both these teams have not won the final or the title as yet and therefore, actually look forward to not just by their fans but everybody else, covering the sport and the IPL to see something new happening.
Govindraj Ethiraj: So, what brought them here to this point since you're saying that this is unusual given past IPLs?
Ayaz Memon: Yeah, I think a couple of things. In the case of Punjab, they've had a revamped team, they've got a new coach in Vicky Ponting, new captain in Shreyas Iyer. A new captain means he's captaining Punjab this time but last year, he was captain of the KKR team which won the title.
So, he's used to winning as a captain. In the past, he's also been associated with Delhi which had reached the final along with Vicky Ponting. So, in that sense, he's been a seasoned campaigner.
For RCB, it's been 18 years and they've been a star-studded team for most of this journey. They've had players of the calibre of Chris Gayle, AB de Villiers, Shane Watson, Zaheer Khan and so on and so forth. Starting from, RCB starts with Rahul Rawat and Anil Kumre and then of course, their talismanic player has been Virat Kohli.
So, 18 years, he's seen a few finalists, three of them never won the title. RCB haven't won. So, Virat Kohli hasn't won.
It almost seemed like one of those quirks of destiny that a player who had become the epitome of excellence in all other formats playing for India just could manage to help his team get into winning the title. He's had some great seasons. As you know, Govind, he's the highest-run scorer in the history of the IPL and he's had another great season with the bat like he had last year.
So, there is a lot riding on him personally. Also, obviously, therefore, his team. And Punjab, I think also, is not the marquee team that RCB is.
The marquee teams are Chennai Super Kings, Mumbai Indians, KKR, RCB. For reasons of the cricket as well as the franchise owners, they are also stellar players in that sense, in their own right. Punjab also has some formidable names in the ownership.
In the case of Punjab, I might add that they've had many overhauls over the past 8, 10, 11, 12 years. They've been a team which almost always, to me, it seemed like they were short on patience. So, they would have a team which they put together, cobbled together a team, maybe one season, maybe two, which they didn't win.
So, they would change the personnel after three years. RCB, a little more consistent, but they've also had their changes. Now, this year, RCB seems to have got the composition right.
The balance between batting and bowling. The match winners, the quality of the players, they seem to have got that right. Therefore, they are in this position that we see them now.
Punjab also, in many ways, but Punjab has taken a slightly different tack. They've looked heavily at uncapped players from India to lead them or bring them here under the captainship of Shreyas Iyer, who's had a magnificent tournament. Perhaps, played the innings of the tournament when he led his team to victory over Mumbai Indians in the second qualifier.
So, they've had a great run, all told.
Govindraj Ethiraj: To spend a moment on Mumbai Indians, since both of us are in Mumbai, there was a feeling that they were coasting towards victory or at least towards the finals somewhere along the line. But that changed, didn't it?
Ayaz Memon: It changed. I mean, it started very poorly, the season for Mumbai. I mean, the first five matches, I think they had won just one.
And then they got to this winning streak, a hot streak of wins, which brought them into contention for a place in the knockout and then got them there. And Mumbai, by virtue of having been champion five times in the past and a star-studded team, they've got some fantastic, you know, I mean, on paper, Mumbai looks the strongest team or has looked the strongest team. But obviously, they're not in the finals.
So, therefore, you can't say they're the strongest. I think they came unstuck against Punjab. But T20 can be very cruel, having posted 203, then to lose out because of the brilliance of Shreyas Iyer.
But not just that, I think Punjab collectively have also been very sound and very impressive. Mumbai, I thought that they were in their surge also, when they had this winning streak, they were quite dependent on two players, which was Suryakumar Yadav with the bat and Jasprit Bumrah with the ball. The other players also participated, they contributed, but these two standout performers.
And in the match against Punjab, where they lost in the second qualifier, I think the victory was achieved by Punjab because of the way they tamed or defanged Jasprit Bumrah. By far, the best fast bowler in the world. They defanged him.
They didn't give him a wicket. They took 40 runs off his four overs. And they got over that threat with a mix of bravado and caution, as well as very astute thinking on how to get those runs.
Instead of going bang-bang, they accumulated runs of his three overs. One, of course, they went bang-bang. And once they had got over that threat, I think they just made sure that they didn't lose the grip that they had in the match.
Govindraj Ethiraj: So, I'll come to tonight's match in a moment. But before that, you know, you talked about Chennai Super Kings and Mumbai Indians winning five matches each. That would suggest that they had got the formula, so to speak, right.
At least at that point of time. As you look back now, including at the ones who made it to the final, does it look like there is some semblance of a consistent formula, at least through your eyes?
Ayaz Memon: I wouldn't say there is a formula. I mean, I think consistency is the formula. I mean, you have to be consistent through the season.
It's a long season. Seven, eight weeks. Yeah.
And the weather changes so dramatically and more so because of the delays. And it's a good mix. You know, you play home and away games.
So, you can be very strong at home. But if you don't know how to play away from home or you struggle away from home, then you land up in problems. Now, why is RCB in the situation that they are in?
Actually, they fared better playing away from home. They won every match that they played away from home and lost a few games in Bengaluru. And Chennai Super Kings, normally, Chennai is their bastion.
But they lost a lot of matches there and then didn't do too well playing away from home. Likewise, Mumbai. So, if the formula, if there's any formula, obviously, you have to choose in your squad.
You have to get the right number of, you know, match winners, balance between bat and ball or batsmen and bowlers, Indian players, the kind of picks you made. Because remember, in every playing XI, you have to have at least seven players from India. And therefore, also, what becomes important is talent scouting, the youngsters you bring in, which Punjab have done very effectively this season.
When you say uncapped players, it means they've not played for India. They're not India's stars. But they became stars in the IPL for Punjab.
So, I think they've done that very well. And RCB's case, because they've had star-studded teams in the past who couldn't win. But this year, I think they went about it with some risk-taking.
Because they picked players you might otherwise have said, oh, but how can these guys help you win? But they ticked all the boxes. They've got two spinners, they've got three, four fast bowlers, spinners of high quality, fast bowlers of high quality and a string of batsmen who kind of put together, stack up to quite a formidable lineup.
Govindraj Ethiraj: Right. So, the big match tonight, that's Punjab versus RCB. Who are you rooting for?
And what's your prediction as of now?
Ayaz Memon: I mean, predicting a T20 match is like putting your foot in your mouth. You know, that's the risk you run. Because it can be very topsy-turvy.
What I can say is, it's interesting. Because in the first qualifier, these two teams had met. You know, once you enter the knockout, No.
1 team plays No. 2 in the points tally. And Punjab were wrongly thrashed.
They were bowled out for 101, which RCB won in a canter. And therefore, they reached the final. So, Punjab had to then meet the winner of Mumbai and Gujarat to have a second shot at making the final.
And they came up against Mumbai, as I mentioned, a very strong team, used to winning, and know what it takes to win. And they beat Mumbai. So, the recovery from a demoralising defeat in the first match, the recovery has been equally strong.
And they are playing at a stadium where they have now got some experience, having won the last match there. Patil Guru haven't played except against Gujarat in the league phase. Their knockout match was in Chandigarh or New Chandigarh.
So, for whatever it matters, however it may matter, the conditions, they are more used to it, Punjab. Having said that, on paper, I think RCB seem to have more depth of experience as well as more variety, especially in the bowling. So, that could be a big advantage.
But as I mentioned earlier, this is going to be a battle of nerves and also willpower. Neither team has won a title in the past. So, I think we're in for a really good scrap.
These guys will be desperate to win.
Govindraj Ethiraj: Right. And a most exciting evening ahead and the end of IPL 2025 with the finals. Ayaz, thank you so much for joining me.
Ayaz Memon: Thanks, Govind. See you.
