Markets Hit All Time Highs Again As Confidence Returns
India rejoined world markets in hitting record highs with the Sensex touching a lifetime high of 75,460 intraday, before closing at 75,418, higher by 1,197 points
On Episode 300 of The Core Report, financial journalist Govindraj Ethiraj talks to Sanjeev Hota, vice president, head of research at Sharekhan as well as Ayaz Memon, veteran cricket and sports journalist.
Our Top Reports For Today
SHOW NOTES
(00:00) Stories Of The Day
(01:00) Markets hit all time highs again as confidence returns
(03:40) How will domestic institutional investors play the peaks?
(16:00) Indigo results reflect growth in one of the world's hottest aviation markets
(17:25) 7,000 IIT students without placements. Why is this number rising?
(18:46) 72 matches later, IPL season set to end on Sunday with finals
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 On Strong Mode
We are back in record high mode with the markets having regained full confidence that the Government in power will return to power when the votes are counted in India’s 5-year general elections on June 4.
The jitteriness that hit the markets in previous weeks has now receded and in retrospect is a good opportunity for traders to have used the downs and ups.
Obviously all of this is in perfect hindsight.
On Thursday, India rejoined world markets in hitting record highs with the S&P BSE Sensex touched a lifetime high of 75,460 intraday, before closing at 75,418, higher by 1,197 points and the Nifty50, on the other hand, coming close to 23,000 after hitting a record of 22,989 and ending 370 points up at 22,968.
The broader markets were strong as well, touching lifetime highs too, with the BSE MidCap index hitting a new high of 43,442.5 and the S&P BSE SmallCap index touching a new lifetime high of 48,229.
The spikes were driven by financial stocks and one key trigger overnight was the massive dividend that the Reserve Bank of India - about Rs 210,000 crore - passed on to the Government.
That in turn was seen to be improving the macros - like India’s fiscal deficit - and also boosting further Government spend in infrastructure and related areas which sent stocks including in the public sector soaring up again.
More on public sector stocks in a moment.
For the Sensex and Nifty, these were the best day since March 1 when faster-than-expected economic growth data drove markets to a record high, Reuters said.
This was also the 6th straight session the indices rose and being their longest winning run since early December.
There is an interesting circular effect happening wherein Government spending or increased prospects of it are leading to bigger gains for public sector units based on the belief that they will get more business.
Or place more orders on other public sector units.
The Business Standard points out for example that share prices of BEML soared 11 per cent to Rs 4,642, its new high on the BSE in Wednesday’s intra-day trade, surging 25 per cent in the past four days.
This came after the company announced on Friday, May 17 that it has bagged an order worth Rs 250 crore from Northern CoalFields Limited, another public sector company, for dump trucks.
There are several other such examples In the past six months, the market price of BEML has more than doubled or zoomed 107 per cent.
This is perfectly normal business at one level and at another, a positive domino effect which one needs to watch carefully.
Which Brings Me To My Question For The Day
Valuations are undoubtedly high so how are institutional investors or brokers looking at the latest rise ?
The other question is that Indian institutional investors are buying consistently thanks in turn to retail investors pouring in money through monthly plans into mutual funds.
And yet,institutional investors must also take money off the table so to speak, domestic or international.
I put this question in the context of overall valuations and outlook to Sanjeev Hota, vice president Research at Sharekhan and began by asking him how he was tracking the trends.
---
Back in global markets, everyone was watching out for chip maker Nvidia’s results and were not disappointed.
Second-quarter revenue will be about $28 billion, the company said Wednesday, topping the $26.8 billion predicted by analysts.
Nvidia first quarter results also beat projections — thanks to Nvidia’s data-centre division which grew 400%. So everything is looking good for now on the AI chip front.
Gold
Meanwhile, record gold prices have slowed down purchases by countries like China whose buying was sending up the prices to start with.
Interestingly, in China, both the Government and retail buyers were purchasing gold though for different reasons.
Overseas purchases of physical gold fell to 136 tons in April, a 30% decline from the previous month and the lowest total for the year, according to the latest customs data, reported Bloomberg.
In India, the RBI too has been buying gold, even as, like China, it has been trying to reduce its dollar holdings and create a geopolitical hedge.
Reports say the RBI added almost 24 tonnes of gold to its stock of reserves in just four months from January to April this year, more than all of 2023 which was 16 tonnes. The spikes are also evident in the gold import data.
RBI is now holding around 828 tonnes worth of gold as a part of its foreign exchange reserves as of April 26, 2024, up from 803.6 tonnes as of end of December last year.
China in contrast has over 2,200 tonnes while the United States has over 8,000 tonnes of gold.
Oil Price Still Low
Oil is still holding near the lowest closing level in three months as traders matched off rising US crude stockpiles and signs that the Federal Reserve may hold interest rates higher for longer.
Brent futures were steady around $82 a barrel in London and crude prices have retreated 11% from this year’s peak, even as global demand powers to a new annual record, amid plentiful supplies from the Americas, Bloomberg reported.
Everyone is now looking out for and at the OPEC+ alliance of producers led by Saudi Arabia and Russia which may prolong current output curbs into the second half of the year when they meet on June
Indigo Results Reflect Strong Aviation Market
India is one of the world’s hottest aviation markets right now and Indigo’s quarterly results reflected this sentiment.
Indigo parent InterGlobe Aviation ferried some 26 million passengers, up 14%, in the fourth quarter posting a 106% year-on-year (YoY) growth in its consolidated net profit at Rs 1,895 crore for the fourth quarter.
Revenue from operations increased 26% YoY to Rs 17,825 crore in the reporting quarter.
Passenger ticket revenues grew 25% to Rs 15,601 crore, while ancillary revenues jumped 19% YoY to Rs 1,719 crore.
Fuel costs per seat kilometre were down by around 7% through non fuel costs were up 14%.
Indigo now has a fleet of 367 aircraft and is sitting on a total cash balance of Rs 34,737 crore.
IIT Students Without Jobs
Between technology shifts, including AI and economic factors, jobs for India’s best or most sought after engineering students are slowing down.
Some 7,000 students from the Indian Institutes of Technology (IITs) spread across 23 campuses now, remain unplaced, says a TOI report based on a Right To Information application filed by an alumnus of IIT Kanpur.
IIT Delhi has reportedly reached out to its alumni network, seeking help to place the current batch of graduates. Approximately 400 students at IIT Delhi are still jobless.
Similarly, the Birla Institute of Technology and Science (BITS) and IIT Bombay have also approached their alumni for support. BITS initiated contact with its alumni two months ago.
At IIT Bombay, about 10% of the graduating class, or 250 candidates, are yet to secure placements, despite ongoing efforts until the end of June.
V Ramgopal Rao, BITS group vice-chancellor, attributed the decline in placements to broader economic and technological factors. "Everywhere, placements are 20% to 30% lower. If some institute is saying all students have been placed, the quality of jobs leaves much to be desired," he remarked.
There are unplaced students every year though apparently the number two years ago for IIT students was 3,400.
IPL Finals Are Coming Up, The Big Takeaways
IPL 2024, accompanied this year by scorching heat and performances, is ending this week.
Ten teams participated in 72 matches so far with 2 more to go and the saga this year started on 22 March and will end on 26 May or Sunday.
Chennai hosted the opening ceremony and will host the final.
For more on the tournament this year, takeaways so far, highlights in individual and team performances, I spoke with Ayaz Memon, veteran cricket and sports journalist and began by asking him what he took away from the tournament so far ?
