Markets Break Out Of Their Losing Streak
The stock markets snapped a three-day losing streak and closed in positive territory, picking up on rallies in global markets
On Episode 599 of The Core Report, financial journalist Govindraj Ethiraj talks to Rohit Arora, CEO & Co-Founder at Biz2Credit & Biz2X as well as Manisha Kapoor, CEO and Secretary-General at the ASCI.
SHOW NOTES
(00:00) Stories of the Day
(01:00) Markets break out of their losing streak
(02:49) Rupee among the worst performing Asian currencies in recent periods
(04:32) India’s census exercise is slotted, 7 years behind schedule
(05:17) Rare earth supply fears spread around the world, automotive companies gear for plant shut downs
(08:06) Did you know who actually makes almost 90% of the famous Dubai viral chocolate?
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 Thursday, the 5th of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. Before we start, we may not have an edition tomorrow as I'm on the road but will be back next week.
The top stories and themes, the stock markets break out of a losing streak.
The rupee is amongst the worst performing Asian currencies in recent weeks.
India's census exercise is now slotted seven years behind schedule.
Rare earth supply fears spread around the world.
Automotive companies gear for plant shutdowns, including in India.
Did you know who actually makes almost 90% of the famous Dubai viral chocolate?
The Markets Recover
The stock markets snapped a three-day losing streak and closed in positive territory, picking up on rallies in global markets, many of which are nearing or touching all-time highs again. US President Donald Trump set Wednesday or yesterday as the deadline for trading partners to submit proposals for trade deals to avoid his Liberation Day tariffs from taking effect in about five weeks. He also said in a late Tuesday night social media post that Chinese leader Xi Jinping was very tough to make a deal with, which obviously raises the question of whether there is any meeting point between the two on the horizon beyond the present truce and what that means for everyone else.
While Indian markets are somewhat directionless, global market cues are still on the positive side. Global equities hit a record high for the first time since February. As signs of a resilient US economy overshadowed uncertainty around trade negotiations, the MSCI All-Country World Index rose as much as 0.3% to 888 points, surpassing the previous high of 887.7 hit in February, according to Bloomberg. Elsewhere, on Wednesday, Germany's benchmark index hit a record high after an approval of a €46 billion corporate tax relief package aimed at kick-starting growth in the region's largest economy, according to reports. Higher US tariffs on steel and aluminium also took effect on Wednesday, applying to all trading partners except Britain, the only country to have struck a preliminary trade agreement. Back in the last week, Indian markets were also eagerly anticipating and to some extent assuming an interest rate cut on Friday.
The Sensex was up 260 points to close at 80,998 and the Nifty 50 was up 77 points to close at 24,620. Amongst the broader markets, the Nifty mid-cap 100 and the Nifty small-cap 100 were also up at 0.7 and 0.79%. The rupee has not been having a good time. It declined for the sixth time in seven sessions on Wednesday, falling or rather going past 86 to the US dollar as traders unbound bullish positions.
The rupee closed slightly lower at ₹85.90, according to Reuters. The currency has now declined about 1.5% from a high of ₹84.78 touched last Monday, making it now one of the worst-performing Asian currencies in this period, according to Reuters. Meanwhile, some other developments are affecting stocks here.
The Wall Street Journal reported the day before that Gautam Adani is facing a probe into whether companies are buying Iranian petrochemical products. US prosecutors are investigating whether Adani companies imported Iranian liquefied petroleum gas or LPG into India through its Mundra port. A company spokesperson said in a statement reported in the Wall Street Journal that Adani categorically denies any deliberate engagement in sanctions evasion or trade involving Iranian-origin LPG, nor are they aware of any investigation by US authorities on this subject.
Elsewhere, in a sign that carmaker Hyundai does not see much of a future in electric two vehicles or in one electric vehicle company, it has sold its entire stake in Ola Electric, while fellow South Korean carmaker Kia has also reduced its holding in that company. The combined share sale brought in about $80 million or about ₹689 crore, according to Reuters. Ola Electric shares are below water, which is quoting at about ₹50.70, which is obviously much lower compared to the IPO price of ₹76 per share. IPOs in general are sucking up capital at a very high intensity in recent months, a phenomenon usually seen as markets peak and institutional investors rush for the exit. Meanwhile, data is the oil that financial markets also look forward to. This includes demographic and other data which will help understand aspects of the economy and economic mobility.
The government said on Wednesday that it will conduct the population census beginning from March 1, 2027. That's almost two years away. Caste census will also be a part of this process, according to the Ministry of Home Affairs.
The census was initially scheduled for April 2020 and postponed at that time due to COVID-19. The government said, however, that the Union Territory of Ladakh and other snowbound areas of the Union Territory of Jammu and Kashmir and states of Himachal Pradesh and Uttarakhand will start earlier. That's October 2026, which is also next year.
Red Earth Fears Grip The World
We spoke of the Red Earth challenge that Indian automakers are facing yesterday because of a slowdown, if not lockdown, of China's exports. Reuters is now reporting that the alarm over China's stranglehold on critical minerals grew on Tuesday as global automakers joined their U.S. counterparts to complain that restrictions by China on exports of rare earth alloys, mixtures and magnets could cause production delays and outages if there was no quick solution. German automakers said on Wednesday that China's export restrictions are already threatening to shut down production.
In April, China suspended exports of a wide range of critical minerals and magnets, which has lockjammed the supply chains to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world, according to Reuters, which added that shipments of those magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports, while licence applications make their way through the Chinese regulatory system.
Companies and governments are scrambling to find alternative options, but obviously, there is no clear alternative option. China controls more than 90% of these flows. Reuters also said that diplomats, automakers and executives from India, Japan and Europe were urgently seeking meetings with Chinese officials to push for faster approval of rare earth magnet exports.
Bajaj Auto, for example, has warned that any further delays in securing the supply of rare earth magnets from China could seriously impact electric vehicle production. The Alliance for Automotive Innovation wrote in a letter to Donald Trump last month and reported in media that without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras. Constellation Energy has agreed to sell power from its Illinois nuclear plant in the United States to meta-platforms as AI sends power demand soaring, according to a Bloomberg report. The parent company of Facebook, Instagram and WhatsApp signed a 20-year contract to buy 1,121 megawatts from the Clinton plant starting in mid-2027 when a state subsidy expires, according to a statement put out on Tuesday.
Constellation is the biggest nuclear operator in the United States. And here's a message from our sponsors. Want smarter investing at your fingertips?
The Future For Small And Medium Enterprises
Some of the most silent sufferers in the tariff wars currently being waged world over and affecting India are small and medium enterprises. The near future looks grim, if not uncertain, for several of these small enterprises, including in areas like apparel and gems and jewellery, particularly the export-orientated sectors.
But so far, the sector has been stabilising. Overall balance-level delinquencies in the micro, small, and medium enterprises segment fell to a five-year low of 1.79% as of March 2025. On the other hand, commercial credit portfolio grew 13% to about Rs 35 trillion during the period, according to TransUnion's Sibyl and Sidby's MSME Pulse report.
The report said that this improvement has been driven by the borrower segment with Rs 50 lakh to Rs 50 crore exposure, while the segment with less than Rs 50 lakh exposure witnessed a slight deterioration in March 2025 compared to a year ago. So, in this sample, it does appear that smaller enterprises have been more hit, which may not be linked to the recent tariff problem, but to the overall economic slowdown. Amongst lenders, private banks hold the best-performing portfolio, says the report, with just 1.2% delinquency, while public sector banks stand at about 2.1%. The report also said that commercial loan demand in the MSME segment grew about 11% year-on-year, though commercial credit supply by value grew only 3%, with an 11% decline in the last quarter, possibly because of higher credit concerns amongst lenders due to increased external headwinds, which goes back to the state of the economy. So, what are the trends in MSME lending for both cash flows and loans, looking at it from a large intermediary's point of view?
I spoke with Rohit Arora, CEO of Biz2x, a platform for small businesses with a sister platform in the United States, and I asked him how he was seeing trends in SME lending post the recent tariff tensions and his takeaways for Indian SMEs and the way forward. Rohit, if you were to look at the Indian SME universe to whom you lend, or you facilitate lending, what are the key trends that you're seeing, particularly in the last year or so, or post-COVID phase?
INTERVIEW TRANSCRIPT
Rohit Arora: There are three distinct trends there. Obviously, we have seen that the demand for credit had increased significantly just after COVID. The last year and a half has been challenging.
There has been a slowdown, overall slowdown, in the industry, including capital goods, including FMCG, including some of the other sectors. VEC demand has now stabilised. It's not going down anymore, but still it's challenging.
Lending side, actually, it's interesting because NBFCs are playing a bigger role. We are seeing even more SME-focused lending happening from SMEs, and even in this very tough funding environment, still some more funding coming into NBFCs, predominantly for SME and less in consumer. Because after the RBI clampdown last year on the personal loans and consumer loans, that activity has now shifted to SME.
So I think from that angle, it's a good angle. I think the challenge still is access to credit in India is pretty expensive and not very deep. So because the securitisation markets are not that deep, the rating mechanism is not really there for SME loan portfolios, unlike US, where it started happening three, four years back, and a lot of insurance money, a lot of pension fund money started to pump in directly into those asset classes, which obviously, in India, we don't have the rating mechanism for SME loan portfolios.
So you can rate the NBFCs for the debt they raise or the debt they offer to raise, but not the loan portfolios itself, per se. Right.
Govindraj Ethiraj: And if you were to look at, let's say, sectors, or if I were to ask you for examples about where you're seeing shifts in the Indian lending portfolio, what stands out in terms of either new industries that have come in or faded out, or any other trends that you're seeing?
Rohit Arora: So I think in terms of the trends, what we are seeing is that obviously, as I said, you know, the export-led SMEs historically have done better in the country, but that might change now with all the tariff stuff coming in. So the other thing is that, you know, I'm also looking at the fact that, you know, with SMEs themselves, the good news there is they are trying to get more digital and more efficient. You know, actually, that wasn't the case earlier.
SMEs were very much, you know, in India were caught in a time-wrap. The good news there is that they are getting out of it at a pretty good pace right now. You know, that's happening.
I think the third thing is going to be that with the realignment of the supply chains, you know, eventually, it all depends on how the China and U.S. trade pact comes along. But whenever it comes along and everything, there's a very strong feeling in the U.S. now that, you know, companies there have to diversify their supply chains and they cannot be totally dependent on China. Now, that's a very big opportunity for India.
I think the challenge for India is that, you know, how does it get its relation normalised with not only the U.S., but China. Because if we are able to do that, then a lot of these Chinese manufacturers can also move into India, actually. But I think the political situation is not that conducive for that today.
But I think the thing to learn from the Chinese is that a lot of Chinese exports have been powered by their SMEs themselves and their ability to create a nurturing ecosystem environment and infrastructure is unparalleled in the world. So, there is an opportunity to bring that into India now. I think the key question is the economics and the politics of it, you know, how both things will pan.
Govindraj Ethiraj: If you want to illustrate that, the government in India also has been saying and has for a long time that we want to help SMEs, we want to give them easier access to funds, whether it happens or not. And there's a lot of effort. So, when you quote the China example, what are the one or two things you feel that we could do in India, which would create some kind of level playing field for Indian SMEs as well?
Rohit Arora: I think there are two or three things that Chinese SMEs did really well in the last 30 years. They were very focused vertically, you know, like, you know, if they're producing subcomponents or something like that. The second thing they did really well was that, you know, the government really had them to create the right infrastructure and the cost of money was very low. So, there was a time in China where as an SME you could borrow at like three, four percent, you know, actually, and that really helped them a lot.
And then players like Alibaba and Ant Financial, you know, really helped them to grow the business, which was massive. I think the third thing is that, you know, how do you improve your logistics and your overall ease of doing business? The Chinese did that really well over the last 30-40 years.
They made it so easy for Western companies to ensure that they could get the right sourcing done, you know, from China. And they made it very seamless and experienced. And that has to improve because more and more, I'll give you one example, you know, there's a whole rage around Dubai chocolates, you know, these days.
So, you go anywhere, you say Dubai chocolates, but Dubai viral chocolates. Yeah, but now the key thing is that, and that has become a huge rage in the U.S., but, you know, 90% of those Dubai chocolates are actually manufactured and are being, you know, shipped from Turkey because the U.S. doesn't manufacture. And, you know, already in the last seven, eight months, the import of Dubai chocolates from Turkey started at zero, is like three billion dollars a year already.
Already. So, imagine that why can't a country like India, like we are celebrating today International Milk Day or something like that. And these are all milk chocolates.
And these are high margin, very visible products, you know, and the high growth products. So, if you go from zero to three billion in seven, eight months, you could be eight to 10 billion. That's a massive addition, not to only your growth, but also profitability.
And in Turkey also, these are being manufactured by small and midsize enterprises, you know, not by big companies.
Govindraj Ethiraj: Right. And that's an interesting example. So, you know, when you look at Indian SMEs, and, you know, I think the Dubai example is interesting because it came out of an Instagram post, a creator who posted on Instagram, and then someone else reposted it, who was already well known, and then it went completely out of the park.
I guess there, the linkage is between, let's say, the creativity and the commerce part. When you look at Indian SMEs, and assuming, let's say, they're doing well on the production front. So, the constraints that you speak of are well known.
What is it that you feel Indian SMEs could focus on? Maybe learning from either the chocolate example or some other example? Yeah.
Rohit Arora: So, Indian SMEs, like I was meeting a guy the other day who does a lot of the jewellery export and all that. So, my first question was, have you thought about setting up a D2C brand, you know, out there in the US? I said, why, why, like I said, how do you sell it?
He says, trade shows, you know, we go there all the time, we book orders, we come back, we give it to the distributors out there and all that. So, I said, why don't you set up a company out there also? And while you're doing this, why don't you, you know, start doing direct to consumer and also use Instagram or TikTok, you know, the way chocolate was all built on Instagram and TikTok, literally, nothing else.
Because in this day and age, the good thing is, and the other thing is how Temu and Sheen have grown so much that even today in the US, in spite of all the tariff bars, any shipment which is less than $800 has zero tariff. Now, there are things like steel pipes and other things that, obviously, there's no D2C brand, but a lot of Indian SMEs don't focus on that. You know, they are focussing on things like jewellery, gems, you know, apparel and all that kind of stuff.
There's a massive opportunity to go on social media platforms and then combine it with D2C strategy. And if you keep each shipment below $800, you know, then you can beat the tariff. Yes, the freight cost will be higher in this case, but once you equalise it with the tariff impact, it's a win-win.
And secondly, going directly to the consumer, you're also increasing your margins, which then you can use to reinvest in your product, marketing, logistics and everything else.
Govindraj Ethiraj: Right. Last question. So, as you look ahead in the Indian market again, are there any specific new products that you're thinking of or product categories that you're likely to get into?
Rohit Arora: Yeah. So, one of the things we are looking at is more like supply chain financing. You know, the second we are looking at is more of a factoring for exports, because today what happens with SMEs is that when they're going to banks to try to get money, it's almost impossible for an exporter.
They have to hypothecate all their assets and everything. So, now RBI is starting to issue RBI factoring licences for some of the NBFCs and they're partnering with us, because we have also created a business in the Middle East with the same financing business, but then that can act like almost like a transshipment point for a lot of these goods exports, you know, into America. So, the idea is that as RBI is starting to do these factoring licences now, because they are also realising that if you are just dependent on banks for all the export led financing, that won't happen.
It might be more cost effective, but from paperwork, from your overall, you know, regulatory aspect, it just takes forever. So, that's the other product. Secondly, we're also looking that if we can do something from India for these SME exporters to get certified and ensure more quality control and QC and QA for them to go and do better and have better opportunities, not just in America, but then also in Middle East and some of the other economies which are doing very well and then just take it from there.
Govindraj Ethiraj: Rohit, thank you so much for joining me.
Rohit Arora: Thank you.
Betting Ads Are Trying To Fool You
As our digital footprint and consumption of media and content grows, so do digital-only efforts to manipulate internet users into partying with their savings, and that includes you and me. The Advertising Standards Council of India, or ASCII, has released its annual complaints report for the year 24-25, which found that offshore betting has emerged as the most violative sector, contributing to 53% of cases.
This was followed by Realty, which is another big surprise, at about 24.9% or about 25%. Personal care, 5.7%. Healthcare, 5.2%. And food and beverage, 4.7%. So there are some distinctions here. The ASCII usually looks at advertisements which make tall or false claims.
But in the case of betting, these are ads that mostly should not be there or are violating other existing laws. Influencer violations, says the ASCII report, contributed to 14% of the ads processed. ASCII looked at about 9599 complaints and scrutinised 7199 advertisements.
Some 98% of the advertisements scrutinised required some form of modification. To return to the banned categories, ASCII says 3,347 of those ads belong to categories that are prohibited from being advertised at all by the law. And these include about 3,000 ads of offshore illegal betting platforms, including 318 ads pertaining to influencers who promoted such platforms, 233 ads that potentially violated the Drugs and Magic Remedies Act, 21 that promoted alcohol brands, and 12 promoted by unauthorised forex trading apps which have been banned by the Reserve Bank of India.
ASCII said it looked at about 1,000 influencer ads of which 98% required modification. Of all of this, which is the ads processed, 89% came from ASCII's proactive work, it says, and the remaining 11% were based on complaints. ASCII's recommendations often lead to action with advertisers usually changing their advertisements or modifying them as the case may be, particularly in mainstream media or involving mainstream brands.
That obviously is not the case for offshore betting ads and so on. I reached out to Manisha Kapoor, CEO of the ASCII, and I began by asking her for highlights from their work in the last year and also to walk us through why areas like real estate were showing such high levels of deceptive advertising.
INTERVIEW TRANSCRIPT
Manisha Kapoor: So I think one is, if you just see over the last two to three years, we have seen newer categories kind of emerge as top violations. There was a time where education, healthcare etc used to be the top two or three categories and they have now been replaced by certain other categories. So offshore betting as a specific example of what has emerged at the top.
Reality is another thing that we have been scrutinising over the last year. Therefore, we see newer categories, newer formats kind of making it to the top of the table. So that's certainly one change that we have seen that's happened over the last 18 to 24 months.
And I think the other thing is just that digital is becoming a bigger and bigger part of both what we are monitoring and where we are therefore also finding violations. Digital used to be about even four years back around 35 percent of our work and today it's over 90 percent. So clearly that's an area which is also focused for us but we are also having to come up with ways in which we monitor an unlimited and infinite media.
Govindraj Ethiraj: So we could also suggest that gullibility levels are higher for digital consumers compared to television and print.
Manisha Kapoor: I think because television and print have historically had grown up in that sense or evolved in a regulatory environment, I think the systems and processes are perhaps more established. I would say that in digital because it's such an open kind of media, you have a number of new advertisers, very small advertisers, companies own websites and channels which are there. So it's just multiplying and exploding in terms of what could be made available there.
So it is consumer vulnerability but also just I think the nature of the media where you see a lot of violations coming in.
Govindraj Ethiraj: And I'll come to offshore betting in a second but reality is almost 25 percent. Now the reason these ads come to you is because they're obviously proposing or professing something which is not true or not backed up. So what was it in the case of reality and why is it so high?
Manisha Kapoor: So one of the things that we've started doing is to really look at certain focus and priority sectors because as I mentioned it's difficult to monitor every single thing on digital. So even as someone who is monitoring the environment, we need to say okay these are two or three areas of potentially greater consumer harm that we must focus and prioritise. Last year we did a tie-up with Maharera, the Maharashtra regulator for reality.
So they asked us also to look at some of the violations in the sector and therefore our scrutiny also was high in the reality sector. The Maharera itself had a few regulations in terms of QR codes being available on their ads that consumers could immediately see the details of the project they might be investing in and we found that many of them were not carrying those or that information that consumers needed to make an informed choice. Therefore in coordination with Maharera, we undertook a project and which is why you also see a lot of scrutiny that we had on reality last year.
But as I said I think the overall approach is to look at sectors which we feel will have a higher consumer impact in terms of harm.
Govindraj Ethiraj: Right, but in reality your partnership was with Maharashtra but the numbers are national right? I mean when you say 25 percent of your total sample.
Manisha Kapoor: Yeah the numbers are national but most of the real work has come from builders who operate in Maharashtra. But of course if we were to get or receive a complaint from any part of India in reality or if we were to come across in our own monitoring an ad that was placed in another part of the country we would pick that up of course. But in this particular instance the majority is likely to be from Maharashtra.
Govindraj Ethiraj: And you're saying in most cases at least in the Maharashtra context people were not the builders or developers were not giving links to the regulatory site for their project and so on right? Is that the main complaint?
Manisha Kapoor: Yes, so that was the complaint that Maharera wanted us to kind of focus on. But of course when we saw an ad we would also look at it for other kinds of violations. So we looked at it across a number of possible violations on the ad.
But yes Maharera because it was a new provision that they had introduced and was very interested in knowing the compliance regarding the same.
Govindraj Ethiraj: Right, now let me come to offshore betting. So where does this come from? Because offshore betting in principle is not legal but you're looking at what is the claim here versus whether it's backed up or not.
Manisha Kapoor: So there are a couple of things, Govind. One is that categories like offshore betting are in violation of most laws of India. So you know betting laws are state laws but most states in India have banned betting.
And therefore the focus on ads that are in a sense prima facie not allowed at all to be broadcast in India or to be shown to the Indian public. Many of these operators are offshore, they have no presence in India and therefore as a self-regulator it is difficult for us to identify where they operate out of or what jurisdictional action can be taken. So what we do in these cases is that when we identify these ads we escalate them to the Ministry of Information and Broadcasting who with the help of Meti then block these websites or get these websites or links taken down.
So that is the action that is really needed because as I said I mean these are not legally permissible ads in India.
Govindraj Ethiraj: So the issue here is that those ads are visible in India and are being obviously consumed, not the fact that they are making a claim that is contestable or false and so on.
Manisha Kapoor: So as of now we are escalating them for their mere presence because the presence itself is not allowed. Should there be a regulatory framework that permits such ads then we can look at the content of that ad and see whether that adheres to certain regulations etc. But when the advertisement is not permitted in the first place then you know that itself needs to be addressed.
Govindraj Ethiraj: Okay, so healthcare, personal care and food and beverage are about 15%. So within that 15% are there standout categories vis-a-vis previous years or is it similar types of violations?
Manisha Kapoor: So the violations are similar but what we see as a constant increase is personal care getting impacted a lot by influencers and influencer violations are quite high in that category because personal care I think relies a lot on influencer advertising and influencer marketing. We see that many brands come up as violators not because of advertisements they may have released themselves but because of advertisements that are spoken of by their influencers. Now this obviously points to the fact that controls seem to be not adequate, that brands need to be able to develop systems when influencers are speaking about their brands so that they are not in violation and many of them are you know in violation of the disclosure norms which is just not declaring to consumers that these are ads in the first place and then of course you know what content is being spoken and there we see healthcare for example coming up a little bit more where the content of what is being said needs to be more monitored and needs to be you know more careful in terms of a healthcare claim that is being made to the public. Our guidelines also require people making specific healthcare claims to be appropriately qualified to be making those kinds of claims and those are the kinds of violations we see on the influencer front that are also pushing these categories up the chart.
Govindraj Ethiraj: Any example that illustrates this in terms of kind of healthcare claim or product claim?
Manisha Kapoor: So I mean I won't name the company but you know very recently we had an example where an influencer was talking about a skincare cream and talking about certain ingredients and certain benefits which as an ordinary consumer you would not know. You know you talk of certain acids and certain ways in which they act upon your skin. Now that as an ordinary consumer I would not know but you know if an influencer is making those kinds of claims saying that you know these ingredients work in this manner or you know they're able to kind of take care of certain issues in your skin then on what basis are you saying that?
That needs to be clear. So do you understand the issue or are you just saying that and for healthcare claims we need the influencer to understand the issue independently not just because that is being said in the advertisement.
Govindraj Ethiraj: Right Manisha, thank you so much for joining me.
Manisha Kapoor: Thank you Govind, always a pleasure.
