Markets Jump Again
Global stock markets are now tracking higher after all the main US indices closed at fresh record highs on Tuesday
On Episode 674 of The Core Report, financial journalist Govindraj Ethiraj talks to Tarun Pathak, Research Director at Counterpoint Research as well as Pushan Sharma, Director at Crisil Intelligence.
SHOW NOTES
(00:00) The Take
(04:31) Markets jump again as Trump appears to smoke a peace pipe.
(07:04) No GST rate cuts on mobile phones but sales are expected to be strong, picking up on Apple’s latest iPhone 17
(16:50) This year’s monsoons have been excessive and hurt crop production. What should policy makers do next?
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 11th of September, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, and I must record, it's been another bright day today with lots of sunshine.
The Take: India's Ever-Hungry Retail Investor
Indian retail investor appetite appears to know no bounds.
The Economic Times says investors forked out over 2,700 crore rupees in just four hours on the 10th of September to invest in initial public offers or IPOs of a range of companies. One of them is a marketplace of services whose business model I would have thought is conceptually challenged and practically unsound. But the company reported a handsome profit.
Now, this is good news, except that the timing of these rosy numbers ahead of a mega IPO meant to mostly help its venture capital investors exit their investments should surely raise an eyebrow or two. Diving in, the company's revenue from operations jumped 38% in the last year to 1,144 crores, a rise that's creditable but also begs the question as to what happened in the last year that caused people to hire the services of more carpenters and masseurs or such people in such large numbers. Meanwhile, profits also jumped dramatically to 239 crore rupees, which is obviously a remarkable turnaround from a net loss of 92 crores in the previous year.
Of course, the profits would have been less spectacular were it not for a 211 crore recognition of a deferred tax asset. Now, all these figures are from HDFC Securities. But the larger point is that India is and was the second largest IPO market in the world last year, raising over $20 billion.
And this year, this figure could touch $28 billion. If all goes well for the companies in the race, there's another several hundred thousand crores of investors' savings transferred into the hands of institutional investors, many of them departing ones, and founders and promoters. Nothing wrong, after all, this is capitalism.
Except that small investors seem to be investing out of sheer desperation rather than strategy, and that applies to large and small investors locked into Indian markets. Indian institutional investors, including mutual funds, are buying stocks because there is no place to invest as such, and acknowledging, at least institutional ones do, that this is a particularly weak time for earnings or other, we've been seeing consecutive months of, or other quarters of, weak earnings. Small investors are putting money into mutual funds and investing directly also because high inflation and stagnant incomes are making them desperate for avenues other than traditional bank deposits.
Many youngsters may not even know what a bank deposit is today. And poorly regulated or unregulated content on social platforms like YouTube, powered by stockbrokers, funnel traders into slick apps which they own, and thus complete the chain and flow of funds. Direndra Kumar of Value Research in a recent article pointed out that debt is climbing.
Household debt load in India is nearly 38% of GDP and liabilities are rising faster than savings. The most visible sign, he says, is that credit card outstandings has gone from 253,000 crore rupees to about 292,000 crore rupees in just a year. When viewed together, combined with the share flows into equity markets at a time when fundamentals are not so strong, the signs are worrying.
Now that anyone cares, the number of individual brokerage accounts has crossed 200 million now, or one for every seven Indians, as a New York Times article on India's investing frenzy just last week pointed out. And by the way, the individual retail investor story is similar to other markets. Wall Street is moving similarly and quite irrationally, you could argue, as many people do even there.
For instance, each time there's a negative jobs report or a negative inflation report, markets jump. Why? Because there could be an interest rate cut, which will bring in more capital. Gold prices are skyrocketing too, hitting fresh highs along with Wall Street and stocks there.
Gold prices are rising because of apprehensions amongst investors about the US economy and impact of tariffs and the post-Trump world in general, not to mention wars breaking out every now and then. So it's not often that fear and greed coexist together so effortlessly.
And that brings us to the top stories and themes.
The stock markets jump again as Trump appears to smoke a peace pipe with India.
No GST rate cuts on mobile phones, but sales are expected to be strong, picking up on Apple's latest iPhone 17 launch.
This year's monsoons have been excessive and hurt crop production. What should policymakers do next?
The Markets Hit Highs
Global stock markets are now tracking higher after all the main US indices closed at fresh record highs on Tuesday, thanks to expectations and optimism of rate cuts from and by the Federal Reserve. Now, India may not be specifically following Wall Street cues, but is benefiting from what appears to be some cooling off on the part of US President Donald Trump, though it's tough to interpret because while there were seemingly conciliatory statements posted by him, there was also an appeal to the European Union to put about 100% tariff on India and China for buying Russian oil.
But the larger point is that the Indian economy and markets appear to absorb the main shocks for now. And though how many of the labour-intensive industries are and will be able to cope, including apparel, gems and jewellery, and seafood exporters among others, is not clear right now, but I'm sure we'll know in coming weeks. On Wednesday, the indices were up thanks to IT, that's information technology stocks and public sector bank stocks.
The Sensex was up 323 points to close at 81,425, while the Nifty 50 was up 104 points to close at 24,973. The Nifty Mid Cap 100 and the Nifty Small Cap 100 were also up at 0.8% and 0.7% each. On the other hand, gold and oil are holding strong.
Gold is of course hitting record highs on geopolitical risks. Israel launched a surgical strike on Hamas leaders in Doha, that's in the city of Doha, in Qatar, and Poland said it shot down Russian drones over its territory. Elsewhere, Oracle founder Larry Ellison is now within striking distance of Elon Musk for the title of the world's richest man after Oracle stock jumped more than 30% in overnight trading.
It was driven by booming growth estimates for its cloud business, which thrilled analysts CNBC reported. Quoting Deutsche Bank's Brad Zeltnick, who said that they, that's Deutsche Bank, were all in a kind of shock in a very good way. That's in reference to Oracle, which said that its revenue in its cloud infrastructure business will jump 77%.
Apple, of course you know this, has debuted several new products at its launch event yesterday, including iPhones, Apple Watches, and AirPods. And despite all of this, the stock was down 1.5% according to CNBC, but much more on Apple in a moment.
Apple And The Smartphone Ecosystem
Apple launched several new products on Tuesday, including notably a thinner version of the iPhone called iPhone Air.
The latest iPhone 17 will be produced entirely in India. And Apple and iPhone are significant because Apple has cut a side deal with the US government which allows them to export from India at zero tariff, which is even a better deal than what China has right now because China still has to grapple with a baseline fentanyl tariff on its exports. The value addition in China, of course, is much higher.
Picking up from Apple's latest launches, what is the overall prognosis for the smartphone market in India? Including after the recent GST rate cuts, though there are no rate cuts on mobile phones. And how are coming months looking for smartphones and the mobile phone ecosystem? And more importantly, what are consumers buying this season? I reached out to Tarun Pathak, Research Director and Telecom Analyst at CounterPoint Research, and I began by asking him what he took away from Apple's latest launches.
INTERVIEW TRANSCRIPT
Tarun Pathak: Two things that are standing out for us. One is right now the timing, right? Obviously, what we have seen in the past couple of months, the geopolitical shifts have been huge in terms of the tariffs, obviously, and then whatever happened between India and the US.
And the iPhone is like one of the major launches within the smartphone across the world, right? And this is also a bit symbolic because now this is for the first time all the new iPhones will be actually made in India. So, if we look at it from the product point of view, this is the widest range of iPhone portfolio we have seen over the years.
Starting with the, if you see in India foreign market like India, N-1, N-1, which is like 15 or 14 will still be relevant, up and running for the new festive season. At the same time, we'll have the iPhone 16E in the picture, and now the Air, the new one. Obviously, the lineup looks very, very strong for Apple.
And at the same time, what we are seeing is this, if you overlap it with the momentum that Apple is having here in India, it sounds like they are going to have a very strong festive season. And at the same time, in the next couple of years, they are going to continue to strive for double digit growth, at least in India, because now for Apple, it's not just about the iPhones, but at the same time, the other ecosystem products that are also ramping up. We have seen their stores, even the two new stores they have started, one in Bangalore, one in Pune.
So their retail strategy is catching up. Manufacturing is happening. Now the broadest range of portfolio.
So it seems like things are very much there for Apple in India.
Govindraj Ethiraj: Right. And you're saying the entire iPhone 17 range is produced in India, that's sold globally?
Tarun Pathak: Yes, that's the expectation. Yeah. So India is going to manufacture every new iPhone.
Govindraj Ethiraj: Including the thin one? Including the thin one. iPhone F.
Okay. Which means that all iPhone production has moved from China?
Tarun Pathak: Actually, whatever we have gained, we have gained it from China. So technically, there are only two major production centres, if we exclude Latin America, because Brazil and Mexico have their own rules on that. And they're doing a bit of volume on that.
But you can say like 99% of it is between China and India. From the iPhone perspective, last year until like December, 18% of the global iPhones were made in India. This year, we can see that number can go as high as 25 to 27% as well.
Our initial projection was like 23%, but that number can go even higher because obviously, since April, we have seen a big chunk of iPhone exports going to the US and that has diverted from regions like Europe or so. But now with the fresh production, we can see both these regions growing up from India.
Govindraj Ethiraj: So back to iPhone 17. So you said all iPhone 17s are being produced in India. So when you say 25%, how does that link?
Tarun Pathak: So 25% is like let's say Apple is almost close to like 230 million iPhones a year. And out of that worldwide number, we are expecting 75% of that will go to China, and then the remaining will be in India.
Govindraj Ethiraj: That's because they're producing other models of iPhones as well, not just the latest one. But the latest one is being produced in India, is what you're saying? Yes.
Got it. A question now on the overall smartphone market in India, we've just had a GST rate cut, which has not affected mobile phones or smartphones. Is there any impact that you're seeing any downstream or otherwise?
Tarun Pathak: We are seeing an indirect impact. So we did a very interesting survey with MySmartPrice with a sample size of 10,500 users. And the first thing we asked them during this festive season, what is the number one consumer electronic product you are going to buy?
38% of people said smartphones. And the next number two was like, I think it was laptops or the TVs. But the point is 38% of people are looking to buy a smartphone this festive season.
And I think apart from GST indirect advantage, because they will be saving on a lot of other things. But at the same time, the tax incentives that we have seen in February are likely to have an impact during this festive season, because people have realised their savings. So I think from a consumption point of view, spending is going to go up.
Already we are seeing some positive sentiments during this festive season. Obviously, there were some headwinds as well, in terms of forex, like we have seen a rupee almost hitting 88 in terms of dollars. And at the same time, the floods that we have seen, just the monsoon was like there.
But then we have seen a lot of parks in India, especially in the north. The floods were there, and that has impacted a lot of people. So there are some headwinds, but I think that tailwinds are more, the sentiments are positive . Even with the big tariff impact that we have seen, we are not seeing an immediate big impact in terms of consumer spending. Now we have the fastest growing GDP as well.
The overall macro environment looks positive.
Govindraj Ethiraj: Right. If I were to come to trends within phones, you know, for example, I think the last time we talked about how AI was a big selling point. Folding phones were also a selling point a little before that.
So what's it this season?
Tarun Pathak: I think there are a lot of things. So obviously AI and the foldables. So I think by the time we spoke, the foldables had come a long way.
The Galaxy Z Fold 7, I think is one of the best foldables right now out there in the market. So that category is picking up, growing double digits. That category has seen some dip in the past year, but now it is again back to growth.
Motorola is doing a good job on the flip. AI is there, but AI as a feature is good, but it is not still driving people to go for an upgrade or buying a phone. But then there are a lot of other innovations that have happened over the past couple of quarters.
One of them is on the battery side of things and the design side of things. So if you look at two major innovations we have seen in the past couple of quarter launches is on the thinness and on the battery. But both things are kind of interrelated to each other because you can only make a phone thin if you have optimised the internal layouts.
So I think even yesterday's launch on the iPhone was a perfect example of how they have achieved that kind of 5.6 mm thinness and they have to work on a lot of internals. So for example, the entire camera bump needs to be changed. Now they have the vapour chamber, the OTG layer in the OLED screen, and at the same time what other players on the Android camp are doing is they are going with the silicon carbon batteries.
So what they do is they help you to pack more density while maintaining their same shape. So it means you can have a slimmer phone, but you can even have a bigger battery now by adopting the silicon carbon instead of lithium-ion batteries. So there are a lot of innovations that are happening in that space.
For example, eSIM. iPhone 17 here is all eSIM models, right? And they have done a good job in saving their space to allow for even more thermal profile.
So yeah, that's one of the big design changes that we have seen in the past couple of quarters as well.
Govindraj Ethiraj: Right. And you're saying that these batteries will last longer as well apart from having become thinner?
Tarun Pathak: Because they have more juice now in the same because it's all about cells, how they're stacking those denser cells in the same packaging space. So in a way like now they can extract more juice from those batteries.
Govindraj Ethiraj: Right. And last question, Tarun. So we are now in the third quarter.
How are you seeing the overall year so far in terms of what you projected and how does it look?
Tarun Pathak: So we are projecting last year we did close at around 154 million smartphones in terms of selling. This year we are expecting 157 million. So the smartphone market is still in single digit because the first half of the year was not that great.
It didn't do as we expected. But the second half, especially the festive season, we are expecting 4% of growth by volume and almost like 8% by value, which will help to increase this single digit low single digit year on year growth. So yeah, festive season, we are a bit positive on that.
And another trend what we are seeing is the gain of the mainline channels, the offline. I think they are going to have a big say during this festive season as well. Quite well prepared.
We also believe the offers and the incentives during this festive season will be even more aggressive as compared to any of the festive seasons we have seen in the past two years, which means consumers are up for great deals in terms of their consumer electronics if they are going to buy. And we have already seen that happening with the GST 2.0, especially on the cars. The enquiries are flooding in.
People are going to the showrooms. The enquiries have actually been shot up by almost 5 to 6x on the cars. So I think the overall consumption pattern and the economy wise, it's a very good sign.
And we might end up here on a high note with this kind of policy reforms we have seen.
Govindraj Ethiraj: Right. Tarun, it has been a pleasure speaking with you. Thank you so much for joining me.
Tarun Pathak: Thank you so much.
An Overdose Of Rains
In June, there was a general sense of relief that monsoons 2025 were going to be good. And they also, if you remember, hit a few days earlier. Looking back as we reach the end of this year's monsoons, we're dealing with a problem of plenty.
States like Punjab and Rajasthan are staring at major crop losses after heavy rains. The southwest monsoon, which delivers about 76% of India's rainfall, typically influences India's agriculture and economy. Its quantum and temporal and spatial distribution impact Kharif and Rabi crops and food prices, inflation demand and consumption, a new report from Crisil Ratings says.
Moreover, the report says that over the past 10 years, rainfall deviations of between minus 14% to plus 10% have affected sowing yields and prices. Erratic rains also harden inflation since food makes up 47% of the Consumer Price Index basket and a 47 and 40% share of rural and urban household spending, respectively. I spoke to Pushen Sharma, Director of Crisil, and I began by asking him what he was taking away as top line numbers in terms of the impact of this time's monsoons on India's agriculture ecosystem.
INTERVIEW TRANSCRIPT
Pushan Sharma: So if we look at the monsoon this year and as of 9th of September, we see that we're about 8% above normal. And out of the 36 states and union territories in India that IMD records monsoon at a cumulative level, we see that two states have a large excess, 12 have an excess, 18 are in the normal zone, and 4 are deficient. So the deficiency largely is in the east.
And the states where we're seeing deficient rainfall, that's Arunachal, Assam, Meghalaya, and Bihar. So out of these four, Bihar still has a meaningful share in overall production. But what one can see is that the deficiency is quite localised and in states where the overall contribution to production is not very meaningful.
So that's one, that overall we're at an excess, deficiency only in the east. Now if you look at how the spread of rainfall has been the temporal spread, and if we look at how we are this year versus the previous year, we see that the month of June this year had 9% higher rainfall than the long period average. Last year in contrast, it was 89%.
July and August again, both have been 5% above normal. Last year it was about 109% for July, 115% for August. So if we were to summarise this, what it means is that this consistently for June, July, August, we've seen excess rainfall.
Last year, rainfall was very slow to start and it started catching up from July and August. But this year it's been consistently higher across these months.
Govindraj Ethiraj: And the two states that you've talked about excess, is Punjab and Haryana?
Pushan Sharma: Haryana and Punjab, these are seeing a large excess.
Govindraj Ethiraj: And that's obviously affected the entire cropping flow for the country, isn't it? And how?
Pushan Sharma: So if we look at just some more bit, if I were to just look at the overall trend of rainfall before we get into the impact, if you also look at the last 10 years of rainfall, typically in a span of about five years, one sees two years of below normal rainfall, and three years of normal rainfall. That is what statistically we see. But if you look at the last 10 years, and if we break it into two five year buckets, so 2015 to 19, we saw three years of deficient rainfall, one year of normal and one year of excess.
But in the last five years, we've seen only one year of deficiency, one year of normal and three years of excess. So even from a trend perspective, we're seeing more excesses. And this is when I say the last five years, 2020 to 2024.
And this year again, as we speak, we are in an excess situation. That's the overall trend. And in terms of what impact this could have, we're seeing that the impact is localised in few states, especially those that have seen a lot of rainfall in the month of August, because that's where, you know, crops are at a critical stage of growth.
We're seeing impact in Rajasthan. And crops that are getting impacted here are jowar, and Rajasthan accounts for about 31% of jowar production in India. Green gramme, that is moong.
More than half of India's moong production comes from Rajasthan. Black gramme and bajra. So these are the four crops that we're seeing having an impact in Rajasthan.
In Haryana, it's largely paddy that's getting impacted. Punjab, it's again paddy. Again, Punjab has about 12% of India's paddy production.
Cotton too is getting impacted, but Punjab accounts for only 1% of cotton production. So I would say largely it's paddy in Punjab and Haryana bed. Telangana, we're seeing again this state getting impacted because excessive rainfall has taken place in the month of August here.
Here, cotton is the crop that we are seeing getting impacted and Telangana accounts for about 18% of cotton production. So this is at a broader level. But if we look at the notional loss that farmers may incur, and how we've calculated this is the production loss that may occur multiplied by the prices that are prevailing.
The real loss may actually be slightly lower than that because if production lowers, the prices may increase eventually. So in the case of Punjab and Haryana, we're seeing about 3000 to 3500 crores of losses for farmers that were sowing paddy. In case of Rajasthan, in Greengram, that is Moong, about 1200 crore of notional loss.
And for Telangana cotton farmers, it's about 300 crores of notional loss. So that's what we are seeing the impact of these commodities. If we were to contextualise these numbers at an overall India level, they would be less than 1% in terms of the gross value of output for the Harif season for food grains.
Govindraj Ethiraj: But you're still saying it's about close to 5000 crores worth of losses to farmers. That's right.
Pushan Sharma: And these are notional losses. If the prices go up, the losses may be covered.
Govindraj Ethiraj: And in terms of absolute supply, what does this do to the market in the near term?
Pushan Sharma: So in terms of the absolute supply, where we're seeing there will be some pressure is definitely on Jawahar, Bajra, Greengram, because these are quite concentrated in their cultivation in Rajasthan. So these three crops, paddy not so much because it's well spread out. It's much beyond Punjab and Haryana, we have huge bells in West Bengal, Madhya Pradesh, Uttar Pradesh, where the crop is grown, not so much.
Cotton again, to some extent, we will see a meaningful impact because 18% comes from Telangana.
Govindraj Ethiraj: Right. And if you were to now look back at monsoon 2025, what are the lessons? I mean, one is, of course, which flows from the data. You talked about the fact that we've seen excess every month in this monsoon season, which started in June.
And when I ask about lessons, I mean, what is it that we can do as a country in terms of policy to respond to this sort of, let's say, rainfall trends, if we were to keep our crops protected or our agricultural output more under control?
Pushan Sharma: So, you know, the volatility in rainfall is definitely going to be there. We're seeing that, like I said, in the last five years, we're seeing more instances of excess rainfall. We need to make our agriculture more protected.
Right. We need to have, for example, only about 60% of our land is irrigated. 40% is still rain fed.
Right. So that is one level of intervention in terms of infrastructure, having better irrigation, protected agriculture so that these events do not impact the crops and their production to the extent that we are seeing. And also better processing infrastructure.
Because, for example, say if there is damage that happens, can we have an alternate usage to that crop? Because every crop has a grade A, grade B, grade C. I mean, it's supposed to have.
As long as that grading and sorting is done, it may still find a market at a low remuneration, at a lower realisation. So that level of infrastructure. And finally, farmers are one of the most vulnerable in our country.
They take extreme risk because a lot depends on the weather gods. And in such situations, if the impact is really significant, they may need some short term cash support because a lot of their livelihood depends on this. And this has a cascading impact then on consumption.
Right. So they may need some insurance support. Insurance penetration is extremely low in India.
A lot is also in the states. They need to contribute. You know, the farmer, it's quite subsidised.
The states need to contribute. The centre also contributes. But we're seeing that the penetration of insurance is extremely low and it's been reducing over the years.
So that also needs to be taken care of so that farmers can offset their losses in such situations.
Govindraj Ethiraj: Pushan, it's been a pleasure. Thank you so much for joining me.
Pushan Sharma: Thanks. Thanks a lot, Govind.
