Markets Hit Fresh Highs, IT Stocks Stage Dramatic Turnaround

The markets hit all time highs but the most unexpected turnaround in the markets were in the IT stocks, the same bunch the street seemed to have almost given up on but then overnight changed their minds as the Q3 results started coming in

16 Jan 2024 12:00 PM GMT
On today’s episode, financial journalist Govindraj Ethiraj talks to Rahul Jain, VP at Dolat Capital and IT company analyst as well as Dr Ajay Sahai, Director General of the Federation of Indian Export Organisations.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:01) Markets hit fresh highs, IT stocks stage dramatic turnaround
  • (02:05) Traders are betting that the rupee will rise this year
  • (12:23) Mayhem at airports and airline passengers are losing it, who is to blame?
  • (24:03) India’s automobile exports fell 21% last year

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 And Oil

The markets hit all time highs but the most unexpected turnaround in the markets were in the IT stocks, the same bunch the street seemed to have almost given up on but then overnight changed their minds as the Q3 results started coming in.. More on that in a bit.

The BSE Sensex, helped of course by the IT stocks, crossed the 73,000-mark for the first time, hitting a lifetime high of 73,402 and closing at 73,328, up 759 points.

The Nifty50, too, touched a new peak of 22,116. It ended the day at 22,097, up 203 points.

Shares of Wipro surged 14 per cent intraday, before closing 6 per cent higher, as the company beat profit estimates in its third quarter results (Q3FY24).

The Nifty IT index rose for a second straight trading day, quoting near its two-year high of 37,929 as it jumped 4 per cent on the National Stock Exchange (NSE) in Monday's intraday trade.

Meanwhile, Reuters is reporting that investors are betting that India's rupee will break out of its narrow range and rally this year.

Volumes in the dollar-rupee options market have surged in the first few trading days of 2024, and the direction of these trades shows market participants expect the rupee to rise, breaking out of the narrow range of last year.

The rupee, on Monday, climbed to 82.780 to the U.S. dollar, its highest in more than four months. It has gained marginally in January even as other major Asian currencies have fallen, albeit slightly.

The Reserve Bank of India's (RBI) control of the rupee last year drew criticism from the International Monetary Fund, which reclassified India's currency regime to a 'stabilised arrangement', from 'floating', in December.

A hedge fund portfolio manager told Reuters that the bets on the rupee’s rise is based on the belief that the "frequency of RBI intervention will come off, following the IMF's criticism", the hedge fund portfolio manager said.

That could mean the rupee could break out of last year's range, which was the narrowest since 2002.

How much of course is tough to say though the rupee’s volatility was among the lowest in Asia last year.

I reached out to Anuj Gupta, head of commodities and currencies at HDFC Securities and began by asking him how he was interpreting the rupee’s recent strength.


Oil Falls As Perception Of Tensions In Middle East Ease Off

Oil edged lower as the risk that airstrikes by the US and allies against the Houthis would ignite a wider conflict and disrupt crude flows from the Middle East waned despite missiles flying in both directions.

Brent crude traded below $78 a barrel, or over $77 as equities dipped and the dollar gained, making commodities priced in the currency less attractive, Bloomberg reported.

The markets are basically focussed on clues on interest rates ahead of speeches by policy makers at the World Economic Forum in Davos this week.

While the global benchmark was up more than 4% at one point on Friday, leading of course to speculation that prices would start shooting up, it ended the session with a gain of just 1.1%.

To reiterate, the prices suggest the markets are not expecting the conflict to escalate or expand and affect crude oil production, including the transporting of it through the Red Sea which has seen an unexpected form of hurdles via missile attacks by Houthi rebels in Yemen.

Bloomberg reported that at least three oil tanker owners, which between them marshal more than 350 vessels, said Friday they were pausing voyages through the southern Red Sea.

More are likely to follow suit after advice from Western military forces that all ships should stay away from the area.

On the supply side, the taps are set to be opened wide, including from non-OPEC countries. Combine that with slowing demand growth as we have been discussing here and prices are steady.

On Monday, we spoke to the OIL India Chairman Ranjit Rath who provided a geological landscape of India’s oil prospects, both onshore and offshore.

And now, Oil and Natural Gas Corporation (ONGC), also Government owned like OIL has made two significant back-to-back natural gas discoveries in a Mahanadi basin deepwater block in the Bay of Bengal, PTI has reported.

Significantly, the discoveries have been made in an area, which previously was classified as a 'no-go' area because of national security interests.

The first discovery, named Uktal, is in 714 metres of water depth and flowed more than 3 lakh cubic metres per day of gas during initial testing, they said, adding the other find is at a water depth of 1,110 metres.

ONGC has notified the discoveries to upstream regulator Directorate General of Hydrocarbons (DGH) and is now doing pool size and commercial viability assessments, they said.

India imports roughly half of its gas needs and is targeting raising the share of natural gas in its energy basket to 15 per cent by 2030 from the current 6.3 percent and more domestic production will aid that, the PTI reported.

Natural gas extracted in this manner can generate electricity, make fertilisers or turn into CNG to use as fuel in automobiles and piped to household kitchens for cooking purposes.

Greater use of natural gas will replace coal in power generation and liquid fuels in industries.

Meanwhile, some macro news:

India's merchandise trade deficit narrowed to $19.8 billion in December 2023 compared to $23.14 billion in the same month last year, the commerce ministry said on Monday.

After contracting for the last few months, goods exports growth entered the positive territory coming in at $38.45 billion in December 2023 compared to $38.08 billion in the same month last year, whereas merchandise imports fell 4.9 percent on-year.

Commerce Secretary Sunil Barthwal said, "India is beating the global trends in trade. And we expect higher volumes of exports in the last quarter of the current fiscal."


And some company news.

Tata Consumer Products Ltd (TCPL), the company that owns Tetley tea among other brands will acquire Capital Foods, owner of the brands Ching’s Secret, which is desi or local Chinese flavourings and Smith & Jones.

THe second acquisition is Organic India, a company that sells organic herbal teas and health foods.

The value of the Capital Foods deal is Rs 5,100 crore while Organic India will cost Rs 1,900 crore.

While the food segments here are obviously different, both represent strong domestic brands built up over several years.

More importantly, the deal represents consolidation in the branded foods space with relatively smaller players selling out to a large global brand, in this case being Tata Consumer.

Why Indian Airlines And Staff Fail To Communicate

A year ago, I had the bad fortune of flying Air India non-stop from New York to Delhi. I should not have worried so much. Apart from broken seats and a barely functional and even less visible entertainment system, everything else worked fine.

The aircraft took off on time and landed earlier than scheduled as often happens with eastbound flights. And finally, it was a perfect landing, with the wheels barely kissing the runway and settling down. It was almost like a machine was flying the aircraft.

Actually, it may well have been a machine because from start to end on the 14 hour flight, I did not hear any voice from the cockpit unless it happened at a dark hour when I was sleeping. Highly unlikely though. I do think I vaguely heard someone ask the crew to prepare for landing but I couldn't be sure because the voice sounded quite garbled and could have come from anywhere..

The pilot or pilots did not speak. Period. For a pilot to remain incommunicado for such a long flight and time was very unusual, if not disconcerting, at least for me.

I checked with a pilot friend later if that was normal. According to him, Air India pilots were notorious for giving the silent treatment. Most airlines, he said , did not mandate how much or any announcements the pilots should make because their job after all is to fly the plane, not keep chatting away with the passengers.

But pilots do communicate, I have found pilots being quite instructive on western carriers and chatty particularly if there are delays building up. On domestic US flights, I have found pilots updating every 10 minutes sometimes.

Anyway, our theme today is communication and not the art of flying a plane.

Back home, fog induced delays, sometimes even 12 hours, are causing considerable angst across the country in the last two days. One man charged to the front and hit an Indigo pilot after being strapped in for several hours. He was promptly arrested for his efforts.

Before I come to the delays, a reminder that air traffic has hit all time highs in India.

India saw its highest ever domestic traffic in a single month in December with 13.8 million passengers, a new high, surpassing the pre-pandemic peaks.

The number of aircraft are less for various reasons as many are grounded so more people per aircraft.

All in all, highly combustible situations.

Delays of course happen everywhere in the world and nowhere in the world are unruly or violent passengers condoned. As a matter of fact, all jurisdictions respond similarly as an unruly or violent passenger is seen as being dangerous to the safety of 100s of other passengers.

So that is not the point.

The point is however communication. It is quite clear by looking at multiple incidents in the last few days in Delhi and other cities in India that airlines are failing spectacularly in communicating to passengers.

Not only do they not communicate but they seem to lack a standard S.O.P for doing so, something the aviation minister said in a Twitter post would be addressed.

As a reasonably frequent flyer, I can testify to a complete lack of consistency in the manner of announcements when there are delays. Often, silence seems to be the best recourse and announcements when made, seem to be done quite grudgingly.

Looking back at the last few days of mayhem, if there is one lesson airlines should learn is to communicate, communicate and communicate at all levels, including pilots when stuck on the tarmac, because pilots voices are definitely reassuring even if no one is going nowhere.

I reached out to Captain Sam Thomas, President of the Airline Pilots Association of India and a commercial pilot.

I began by asking him what was his takeaway from the last few days of mayhem including violence against pilots like him.


Meanwhile, the New Delhi airport has been asked to expedite the operationalisation of its CAT III enabled fourth runway that can handle flights during adverse weather, India’s aviation minister said on Monday.

And relevant to our discussion just now, the regulator Directorate General of Civil Aviation will issue a standard operating procedure for airlines to minimise passenger discomfort, due to flight cancellations and delays, the aviation minister said on Twitter.

Automobile Exports Fall

This is not so much about the fact that automobile exports have fallen but that looking at month to month figures can distract us from the bigger picture.

This happens in several categories including GST collections which are of course strong but they have not risen spectacularly if you were to step back and look at a one year graph.

To come to auto exports now, shipments from India declined 21 per cent last year, as per the latest SIAM data.

Interestingly, passenger vehicle shipments rose 5 per cent but other segments like commercial vehicles, two-wheelers and three-wheelers saw a decline in exports last year.

Two-wheeler exports dropped 20 per cent while three-wheeler exports declined 30 per cent.

Last year may have been a minor aberration as there was pent up demand in markets like South Africa and the Gulf region, whereas two and three wheeler markets are seeing subdued demand for domestic reasons.

India’s exports include Japanese and Korean companies like Maruti Suzuki and Hyundai and Kia Motors.

Updated On: 16 Jan 2024 6:00 AM GMT
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