Markets Hold Gains, Mid Cap Index Hits All Time High

The US Federal Reserve held onto interest rates as was expected on Wednesday and on Thursday overnight, Wall Street was holding in the positive territory setting the trend for Dalal Street on Friday

3 May 2024 12:00 PM GMT
On Episode 283 of The Core Report, financial journalist Govindraj Ethiraj talks to Sankar Chakraborti, managing director and CEO of Acuité Ratings.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:09) Markets Hold Gains, Mid Cap Index Hits All Time High, Global Cues Stay Positive
  • (03:48) OECD Raises Growth Forecast For India For This Year, At 6.6%
  • (05:17) After A Spate Of Crackdowns, RBI Pulls Back, Lifts Restrictions On Bajaj Finance Products Halted In November
  • (06:38) Unprecedented Heat Conditions Across The Country, Record Temperatures In Eastern India And Its Heavy Rains Again In Dubai
  • (09:42) Why India’s SME Will Have To Work Harder To Get Their Payments On Time
  • (18:16) Air Transport Association Lashes Out At Germany’s Increase In Airport Taxes

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 Hold Gains, Mid Cap At All Time High

Indian markets were mostly range bound in Thursday’s trade, ending finally positive or up.

The US Federal Reserve held onto interest rates as was expected on Wednesday and on Thursday overnight, Wall Street was holding in the positive territory setting the trend for Dalal Street on Friday.

Back on Thursday, the BSE Sensex closed at 74,611, up 128 points while the Nifty50 ended at 22,648, up 43 points.

Global and domestic cues are positive at this point.

On the other hand, the BSE Midcap index hit its fresh all-time high of 42,564.25 during the session. The index closed 0.91 per cent higher at 42,503.13.

The BSE Smallcap index closed 0.29 per cent higher at 47,451.13.

This would also mean that most standard stock portfolios which go beyond the Index companies would have done well in recent days.

Speaking of portfolios, if you were to use Adani Ports as a contributing proxy to overall merchandise trade in India, then things are seemingly going well there.

Of course traffic can also divert to ports, particularly if some are more efficient or convenient than the others so overall numbers may have not grown as fast or much as one port has.

Adani Ports and Special Economic Zone (APSEZ) , India's largest private port operator, posted a 76% rise in its fourth-quarter profit on Thursday thanks to record cargo volumes, at 109 million metric tonnes (MMT) in the January-March period. Revenue rose 19%.

Adani Ports runs 13 ports and terminals in India, including India’s largest container handling port in Mundra in Gujarat. These ports handle, according to the company, more than 25% of India’s cargo volumes.

One reason the markets were strong on Thursday were falling oil prices earlier in the week.

Brent crude is still holding below $85 a barrel, or around $84.30.

OECD Raises India Forecasts To 6.6%

The Organisation for Economic Co-operation and Development (OECD) has raised its growth forecast for India by 40 basis points to 6.6 percent for FY25 or the current year.

The OECD has said that buoyant public investment and improved business confidence are expected to propel India's gross domestic product (GDP) growth, the Business Standard reported.

It says domestic demand will be driven by gross capital formation, particularly in the public sector, with private consumption growth remaining sluggish.

Moreover, it argues exports will continue to grow, especially of services such as information technology and consulting where India will continue to increase its global market share, supported by foreign investment.

The OECD is an inter-governmental group of 38 high-income economies and the forecast was part of its latest Economic Outlook.

The OECD also acknowledged that private consumption has been less vigorous, confirming the preliminary findings from the latest household consumption expenditure survey.

"Some high-frequency indicators, including on E-way bills, toll collections, and new vehicle and scooter sales, are suggesting increasing activity. Other indicators, such as digital payment transactions and cement output, remain relatively flat," the outlook said.

The RBI Starts To Ease Off

After several months of crackdowns on a wide variety of financial sector players beginning with Bajaj Finance in November 2023 onto PayTM and then JM Finance and more recently Kotak Bank, the RBI appears to have begun responding to the corrective measures undertaken by the companies it had cracked down on.

On Thursday, it lifted the restrictions on Bajaj Finance's eCOM and online digital ‘Insta EMI Card’, with immediate effect, according to an exchange filing by Bajaj Finance.

Bajaj Finance said it would now resume sanction and disbursal of loans in the above two business segments including issuance of EMI cards.

Bajaj’s EMI cards were and presumably quite popular with shoppers, particularly in consumer and white goods and chains like Croma usually have a Bajaj Finance executive to help you take a loan. All of which, along with many others, adds to the rising consumer debt levels in the country, a separate cause for concern.

The RBI had in November barred Bajaj Finance from sanctioning and advancing loans under the two lending products - 'eCOM' and 'Insta EMI Card' due to what it called 'non-adherence' with existing digital-loan guidelines.

Heat Waves Grip The Country Again, Eastern India Hits Record Highs

The eastern parts of the country experienced their hottest April on record, killing at least nine people, Reuters reported.

One reason for low turnouts at the general elections right now, as we discussed with analyst and CVoter founder Yashwant Deshmukh earlier in the week, has been abnormally high temperatures.

The mean temperature in eastern India was 28.12 Celsius in April, the warmest since records began in 1901, with experts blaming a combination of factors.

Meanwhile, the state of Kerala has closed all schools and colleges until Monday due to scorching temperatures, urging people in the coastal region to limit exposure to the sun and take care to prevent wildfires, Reuters reported.

The Indian Meteorological Department or IMD had earlier forecasted a higher number of heatwaves this summer.

The impact of this will be seen on productivity, lives and livelihoods particularly for businesses like construction that are exposed to the elements.

Temperature in state capital Thiruvananthapuram touched 35 degrees Celsius (95 degrees Fahrenheit) but the IMD said it felt like 46 (115) due to high humidity.

The IMD says there is more heating in an El Nino year, the climate pattern

The weather office said rainfall in May is likely to be normal and that it expects more showers during the second half of the monsoon season in August and September as compared to June and July due to the La Nina climate pattern, which typically brings higher rainfall to India.

Olive Oil Struggles

The impact of heat waves and extreme climatic conditions are being felt across the world’s agriculture zones as well.

Two consecutive years of scorching heat in Spain have limited olive harvests, culminating in an unprecedented price rally that has stunned consumers and industry veterans alike, says CNBC.

This matters because Spain accounts for more than 40% of the world’s olive oil production, making it a global reference for prices.

Extra virgin olive oil prices in Spain’s Andalusia hit a record high of 9.2 euros ($9.84) per kilogram in January.

Olive oil prices have cooled due in part to an uptick in production estimates and beneficial rains in March and April.

Speaking of rains, it’s pouring in Dubai again.

Flights were cancelled, intercity bus services suspended and schools remained closed in Dubai owing to adverse weather conditions in the United Arab Emirates (UAE).

The Khaleej Times said an orange alert was issued on Thursday as heavy rains and thunderstorms lashed the desert city.

The National Centre of Meteorology has said that the weather scenario was not anticipated to be as severe as what the city encountered on April 16 which brought everything, including flights at Dubai airport to a standstill leading to backlog lasting days.

The April 16 rains were the heaviest rains on record since 1949.

Why SMEs Have To Solve For Problems Of The Future As Well

India’s SMEs have a tough time getting paid for the work they do because some larger companies and their clients often delay payments.

The Government recently came up with a Income Tax linked amendment which penalised companies who delayed payments to SMEs.

The rule appears to be having an adverse effect with large companies scaling down or trying to scale down their exposure to SMEs.

SMEs have to solve two or three problems at one time. Apart from fighting to keep their balance sheets safe, they also have to now think about being ESG compatible because their principals, in this case overseas, have to. For example, if you supply to Walmart or a clothing brand, your production process in India has to be more environmentally sustainable as well.

I spoke with Shankar Chakraborti, MD & CEO of Acuité Ratings which was founded in 2014 by a clutch of banks including ICICI, SIDBI, SBI, UBI and Dun and Bradstreet.

I began by asking him, what can SMEs do to better gear up in these times?


Catching A Flight To Or Via Germany, Look For Options

Flight prices from Germany to foreign destinations will see a price increase from May of this year.

Germany is increasing its aviation aviation tax for passengers taking outbound flights from its airports and is part of an initiative to fill a €17 billion deficit that surfaced in the budget for this year.

All such taxes are passed onto passengers.

The International Air Transport Association (IATA) sharply criticised the increase in German aviation taxes, which it said will weaken the German economy and damage aviation’s ability to decarbonize.

On 1 May, German taxes on flying increased by 19% to between EUR 15.53 and EUR 70.83 per passenger, depending on the route.

IATA said the tax will make Germany less competitive in key economic areas such as exports, tourism, and jobs.

It will further affect Germany’s air transport recovery from the pandemic, which is one of the slowest in the EU. Germany’s international passenger numbers, for example, are still 20% below pre-pandemic levels.

“When Germany’s economic performance is anaemic at best, denting its competitiveness with more taxes on aviation is policy madness. The government should be prioritising measures to improve Germany’s competitive position and encouraging trade and travel. Instead, they have gone for a short-term cash-grab which can only damage the economy’s long-term growth," said Willie Walsh, IATA’s Director General.

"The German government appears to have an unhealthy obsession with aviation taxes. On top of increasing the passenger tax, it is also in favour of a European jet fuel tax which will make it even more expensive to do business in Germany or for families to go on holiday.

Are IPL Revenues Falling

The average revenue of all Indian Premier League (IPL) teams in Financial Year 2022-23 (FY23) was 23 per cent lower than the pre-Covid-19 year of FY19, said a report quoted by Business Standard, speculating that the cricket franchise and tournament is “reaching a saturation point".

"If we account for inflation, the drop in revenues becomes much sharper," said market intelligence platform PrivateCircle.

"This sharp decline in revenues could indicate that the market for the IPL is reaching a saturation point," said the report, which studied the market filings of companies that own the teams. "It could be due to various factors such as over-saturation of cricket content, changing consumer preferences, or competing entertainment options."

The data in the report showed that in FY23, Delhi Capitals had the highest revenue at Rs 367 crore. Gujarat Titans took the second spot at Rs 360 crore and was followed by Mumbai Indians (Rs 359 crore).

Their figures are lower compared to the top three revenue-generating teams in FY19.

The average revenue of all teams was Rs 394.28 crore in FY19 and fell to Rs 307.5 crore in FY23. However, the report added that income from sponsorships has increased for all teams.

Updated On: 16 May 2024 2:49 PM GMT
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