Markets Look For Cues Even Amid Fresh Tariff Threats
The market psychology to responding to US President Donald Trump’s tariff threats appears to now be, take a deep breath and wait for things to develop
On Episode 628 of The Core Report, financial journalist Govindraj Ethiraj talks to Vijai Mantri, Co-Founder & Chief Investment Strategist at JRL Money as well as Vibhuti Garg, Director – South Asia at Institute for Energy Economics and Financial Analysis (IEEFA).
SHOW NOTES
(00:00) Stories of the Day
(01:00) Markets look for cues even as Trump announces fresh tariff threats
(05:30) Mining and metals giant Vedanta faces an Hindenberg moment with short seller Viceroy
(06:51) Why and how India’s market regulators have to disincentivse derivatives trading
(16:25) Monsoon data is looking good, as is the cropping and agriculture patterns
(17:26) Demand for education loans drop as visas get tighter
(19:42) India’s energy demand has dropped for first time since 2020 and renewable energy including nuclear see big production spikes
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 10th of July and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Our top stories and themes,
The stock markets look for cues even as President Trump announces a fresh round of tariff threats.
Mining and metals giant Vedanta faces a Hindenburg moment with short seller Viceroy.
Why and how India's market regulators have to disincentivize derivatives trading.
Monsoon data is looking good as is the cropping and agriculture patterns.
Demand for education loans drops as visas get tighter.
India's energy demand has dropped for the first time since 2020 and renewable energy including nuclear sees big production spikes.
The Markets Wait For Cues
The stock market psychology in responding to US President Donald Trump's tariff threats appears to be now to take a deep breath and wait for things to develop.
On Tuesday, Trump threatened 50% tariffs on copper imports into the United States and a 200% tariff on drug imports. The timelines for these were not clear. The copper market went into a tizzy with US copper futures jumping a record 10% and drug stocks in the United States were also hit but not so badly.
Trump said that they want to have relationships but in every case they have treated us far worse than I'm treating them, referring to the trading partners. There are other mixed signals even as stock markets globally took stock. Trump said that tariffs will start being paid on the 1st of August 2025.
There will be no change to this date and there will be no change. He wrote on his truth social platform on Tuesday. He again said in other words all money will be due and payable starting August 1st 2025 and no extensions will be granted.
But subsequently he also told reporters that he still planned to punish countries like India for its participation in the BRICS forum and he said that the group of developing countries was set up to hurt us. He said that I can play that game too so anybody that's in BRICS is getting a 10% tariff addition. BRICS was a term coined by Goldman Sachs to denote emerging market investment opportunities and the original abbreviation only had Brazil, Russia, India and China with South Africa being added later.
Back home with no clear cues, Indian markets slipped on Wednesday with the Sensex closing down 176 points at 83,536 and the Nifty 50 closing 46 points down at 25,476. Broader markets were also down. The Nifty mid-cap 100 was down about 0.1%. The Nifty small cap was up about 0.6%. Among macroeconomic signals that one could find, a recovery in global jet fuel demand is set to slow and stall below pre-pandemic levels this year and next as Chinese travel abroad less thanks to stringent US immigration policies which have deterred some tourists and aircraft fleets have become more fuel efficient, according to a Reuters report.
Jet fuel accounts for about 7% of global fuel use and softer consumption could lead to overall lower demand for oil and thus weaker oil prices, says Reuters. Of course, as we've seen, the overall outlook for oil prices going beyond Middle East tensions is of lower prices given more supply and maybe weak demand. Meanwhile, the first quarter 25-26 results are now getting lined up and projections are overall okay but not so bullish as one starts drilling down into specific sectors.
A detailed report from Kotak Institutional Equity says the first quarter 25-26, that's the quarter that just went by, net income will rise about 10.6% but mostly thanks to a jump in profits of oil marketing companies. If you were to take out those oil marketing companies, which includes Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, then the net income increase will be only 4.5% year-on-year, says Kotak. Kotak says sectors like construction materials, which saw an improvement in realisation because of price hikes, healthcare services, which saw higher footfalls in existing beds, new bed additions, renewable energy, that's solar capacity additions and telecom services, higher average revenue per user, will all report strong year-on-year growth in net income.
On the other hand, single-digit earnings growth is being projected for consumer durables and apparels, electric utilities and IT services. And then automobiles and components, banks and consumer staples, gas utilities, transportation sectors will report weaker earnings growth. Overall, Kotak says the first quarter net profits for BSE30 index will go up 6.1% and the Nifty 50 index will grow up only 4.1% year-on-year.
In the commodity markets, gold prices fell further now to their one-week low on Wednesday as investors switched to the dollar after US President Donald Trump's latest tariff threats. Spot gold is now at about $3,289 per ounce, lowest level since June 30th, and US gold futures are at about $3,297 per ounce. The rupee was mostly unchanged on Wednesday, tracking a muted reaction in global markets to the latest trade salvos from the White House, with traders in the domestic market waiting now, like everyone else, for the US-India trade deal.
The rupee closed at Rs.85.67 against the US dollar, almost the same as the previous close of Rs.85.69, according to Reuters.
Vedanta’s Hindenburg Moment
Metals and minerals major Vedanta was hit with a Hindenburg moment after short-seller Viceroy's research on Wednesday said it had shorted debt of Vedanta Resources, the UK-based parent company of Vedanta Ltd. The New York-based Viceroy, which had earlier shorted Tesla, released a 87-page report and said its investigation had uncovered material quantitative and qualitative discrepancies in the Vedanta Group company's operations, according to a report in Business Standard.
The report said that the bait-and-switch funding model, inflated asset values, capex fraud, and governance failure are some of the discrepancies. A Business Standard report also quoted the spokesperson for Vedanta Group saying, or rather dismissing the report, calling it a malicious combination of selective misinformation and baseless allegations to discredit the group. The company also said the document was released without any attempt to contact them and appeared to be solely intended to create false propaganda.
Viceroy said that the entire group structure is financially unsustainable, operationally compromised, and poses a severe underappreciated risk to creditors. It also said that Vedanta Resources was systematically draining its Indian subsidiary Vedanta Ltd. to service its own growing debt obligations.
It also said that this process has led Vedanta Ltd. to take on more debt and deplete its cash reserves, weakening its financial health. Speaking of Hindenburg moments and Wall Street in general, Jane Street Capital, the New York-based algo trader, has responded to SEBI's move to disbar it by essentially defending its practices in the derivatives market.
While the merits of this issue and the debate around its legality is a little more nuanced, there is no doubt that unsuspecting derivative traders in India, most of them small ones, have lost something like 250,000 crore-plus or over $30 billion in the last four years to mostly large and sophisticated firms on the other side like Jane Street Capital. I reached out to Vijay Mantri, co-founder and chief investment strategist at JRL Money, who's been tracking this issue, and I asked him how we should be looking at either disincentivizing retail traders or incentivising them to look at other products.
INTERVIEW TRANSCRIPT
Vijai Mantri: So, first of all, it is not a retail investor, actually. They are not even retail traders, they are retail speculators. So, we buy, I don't know, for whatever reason, we keep calling them retail investors.
Anybody who's indulging in effort, you can't be called traders or even investors. So, they are basically a speculator. And please remember, in speculation, it is very, very clear that a speculator tries to speculate what other speculators are speculating.
So, these big firms with a source of talent from universities like MIT, Harvard, Stanford, Princeton, and even J&J acquired somebody at 4.3 crore salary at the Fresh Ideas. So, they get the best talent, they have the best machine, and then on top of it, they have cash. So, they know what is happening in the market.
And because of their size, even 1 or 2% manipulation or hike or rise in price, they can make disproportionate profit on the option side.
Govindraj Ethiraj: So, who are the people who are benefiting at all? I mean, is it only the, let's say, the international algo trading firms that are benefiting? Are there others who benefit who are sort of part of the link?
Vijai Mantri: So, if you look at total money lost by retail speculator individuals, Indians, is 2,80,000 crore according to SEBI data in the last four years. And if you've observed SEBI, 91 out of 100 investors lose money. And Palestine, only a few actually break even.
So, this is the equation who is losing, we are very clear. Who is making money? The first leg is the brokers are making money because the more transactions, the more brokerages.
The SEBI makes a turnover fee, the exchanges make money, and the government collects STT. But the biggest money is made by all these guys who run this hedge fund or high frequency trades or algo. And the guys who operate through co-locations.
So, the money is being very honestly transferred from retail speculators to all these big guys. So, you can say it is very honestly Robin Hood in reverse.
Govindraj Ethiraj: Right. So, what should we do about this? And how can we create, let's say, either incentives or disincentives for these retail speculators to either put their money elsewhere?
Or is there, I don't know if there's any other solution.
Vijai Mantri: Yeah, there's definitely a solution. Because, for instance, for PMS, you have 50 lakh minimum investment criteria. For AIF, you have 1 lakh, 1 crore rupees minimum criteria.
Because you believe that these products are perhaps much more riskier, the cost could be higher. So, why can't we put a similar kind of thing at a minimum amount of net wealth to participate? And the second is like insurance.
Very simply, you just can't take insurance beyond your means. So, there are many people who used to take insurance in the name of their spouses beyond their means. But insurance industries put the restriction that you can't take insurance beyond certain means.
So, there's no foul play. Similarly, if you look at mortgage finances, you know, it cannot be lended money on the basis of collateral. The regulator made it very clear that the lending would only happen on the basis of your repaying capacity.
So, similarly, based on your income level, these things need to be put in because it's speculation. People would speculate. It is as old as a hill.
So, one has to put, look at, even look at reasonable restrictions as far as other sins are concerned. Let's look at alcohol, 25 years, 21, 25 years of age, smoking, a note at certain educational institutions and all these kinds of things. No advertisement.
Why can't we have a similar kind of stuff? Then we know that data are very clear that a significant amount of money has gone away from the investors. And one of the reasons for stress at urban consumer level could be this.
And we have, since I work in the financial advisory industry, we have honestly horror stories of people viewing their financial life and some of them actually lost their life. So, it is high time that certain restrictions be put in place. And second is the mechanism whereby the exchanges can supervise who's consistently making money.
It is very clear. Anybody who's consistently making money in F&O, it should come very clearly out to the exchanges, whether they did it or not. Only time the Kent report, which came pretty recently, spoke about that the early warning was given by many people.
But the challenge is that even at the exchange level, what we see is that more than 50% of exchanges turnover in options come from prop trading books. So, this is a challenge.
Govindraj Ethiraj: Right. And if you were to, let's say, create alternate products, which could be maybe not more attractive, because I guess the thrill of speculation is something else. But what could be a product approach to address the core problem or the core issue, which is the person's desire to obviously earn money beyond what normal returns are?
Vijai Mantri: So, the lure of outsized gain will always remain very high. So, for instance, look at the state like Kerala with the highest literacy. And very fascinating data shared by one of the funders that in one particular financial year, people in Kerala invested 9,600 or 9,800 crore in mutual funds and bought 16,000 crore of lottery tickets.
So, the lure of outsized gain, one needs to look at very, very carefully. In lottery tickets, the amount you spend is very limited. But what happened in the cash market, suppose you want to buy one lakh worth of shares, you need to give one lakh rupees to the broker.
If you want to buy an option, then instead of one lakh, you just need to pay 20,000 rupees. But in option, you just need to pay 100 rupees. So, you believe that one lakh worth of shares become one lakh 10,000.
In the cash market, you need to spend one lakh rupees to make 10,000 gains. In the future, you need to spend 20,000 rupees to make 10,000 gains. But in option, you can do with 100 rupees and potential gain of 10,000 rupees.
When you see this equation, it is very clear that it is luring people. And the size of the option market is incredible. From 2018, the options market has gone up more than 48 times.
If you look at the Bank Nifty data, compared to the cash market, the option market is 350 times. One of the highest in the world. The option turnover compared to the cash market in India is one of the highest in the world.
In the country where literacy is poor, financial literacy is still very poor, I think it is high time the regulator needs to include. So, we get carried away with so many Demat accounts. But many of these Demat accounts are not for wealth creation.
It is for wealth transfer. So, it is very important that regulators and policymakers sit together and say, we want capital market participation because it is one of the greatest tools to increase wealth and distribute wealth because you participate in the real growth of the country. Right now, most Indians make money through FDs or real estate or gold.
But equity is one of the finest assets. But many people, when they indulge in equity, they don't differentiate between SIP and F&O. They believe it is a capital market, it is a share market, where money will be made.
So, it is very important that the government needs to, policymaker, regulators need to come forward and increase RIA and mutual fund distributors. And today they are very tightly regulated and there's no question of any mis-selling happening. So, I think it is very important that more focus should be put on SIP and more things should be done where the MFD community or RIA community increases from these levels.
So, the financial inclusion reaches out to the last person in any corner of India.
Govindraj Ethiraj: So, last question. So, you mentioned mutual fund distributors. So, why do you feel that contrasts to the discussion that we've been having so far about speculation and speculation in futures and options?
Vijai Mantri: See, I think because if you look at, if you ask somebody to, you make money in the equity market if you stay invested for the long term. So, it requires a lot of discipline and goes to the part of the brain which is responsible for discipline. The same part of the brain feels the pain. So, being disciplined looks like pain to many people but any sin product is very attractive whether you look at food habits or you look at any financial product.
So, it is very important that the right kind of incentive is given. So, people become more disciplined. It can come in the form of a tax benefit like NPS is a unique product where the same tax benefit is not available to mutual funds or insurance or the product.
I think it is very important that we bring back these things and also increase more intermediaries to reach out to more people like the way the FinTech platform has mushroomed. But the FinTech platform has increased more on the F & O side than actually on the investing side.
Govindraj Ethiraj: Right. Vijay, thank you so much for joining me.
Vijai Mantri: My pleasure.
Rains On Track
India's monsoon performance has been on a roll in the second half of June 2025.
After being in the deficit in the first half, the momentum has strengthened further into July 25, with rainfall in the first eight days at about 30% above normal. Geographically, distribution appears to be largely even, with most agrarian states receiving above normal rainfall cumulatively in the season so far, according to a report from QuantEco Research. As such, because of all of this, Kharif sowing has seen a healthy start, with areas sown clocking an annualised growth of about 11%, led by rice pulses, coarse cereals, and oilseeds, says QuantEco.
Reservoir storage, too, remains strong, especially in southern India, where monsoon is lagging long performance average by about 3%. And not surprisingly, expectations of an above normal monsoon performance this year by the Indian Meteorological Department augurs well for inflation outlook, which is, of course, what we're tracking here.
Education Loans Drop
Tightening visa norms in the United States and other countries are now affecting flow of students and thus education loans from non-bank finance companies, which were until recently growing at 50% in terms of assets under management.
A report from ratings agency Crisil says that that pace is set to halve this year, as disbursements for pursuing educational loans in the US is decelerating following all the changes that we've been either reading about or hearing. So last year, the education loan assets under management for non-bank finance companies had grown about 48% to 64,000 crore rupees. The previous year, it was about 77%.
And this year, it will moderate to 25% growth with assets under management touching about 80,000 crore. So the growth is slowing down and quite sharply. Crisil rating says that these policy uncertainties, which include, of course, reduced visa appointments, delays and elimination of optional practical training norms, which helps people stay back, have led to a 30% decline in total disbursements to the United States.
Even disbursements linked to Canada, the second largest market fell as their two student visa rules have turned stricter. And of course, there are more demands for documents, including financial requirements and proof of available funds, and of course, caps on permits. So overall education loan disbursements were up about 8% in 2025.
But that's much lower compared to 50% in the previous year. So education loan givers are now focussing on courses in the United Kingdom, Germany and Ireland and other smaller countries, which have obviously increased as students hunt for alternative destinations. We've already heard about countries like Germany and Spain, reaching out to students from countries like India.
All of this will not fully offset the decline in US linked disbursements, according to Crisil. And this, of course, is a view as seen through the eyes of non-bank finance companies who are lending to students going abroad. There, of course, might be students who are not taking loans for this process.
New Trends In Energy Demand
So good rains are good, as we've just talked about, but they can also be so good that they affect electricity demand and production. India's electricity demand in the quarter through June fell about 1.5% from the year earlier, thanks to a cooler summer and a shorter summer that reduced the use of energy intensive air conditioners, among other things.
Fuel wise, coal based power generation fell about 7.2% on year versus a rise of 10% in the previous year. So power demand fell about 2% in June. Remember, the numbers are small, but the fact that they're following is what is significant.
India received 7% excess rainfall compared with the long period average between June 1 and 25, according to Crisil Ratings. It also pointed out that last year, this period had seen an 11% deficit in rains. Interestingly, while thermal power generation declined year on year, generation from clean energy like nuclear, hydro and renewable energy has increased.
Nuclear energy actually rose almost 6% year on year, thanks to increased generation from a recently commissioned or newly commissioned plant, whereas higher rainfall resulted in almost a 30% increase in hydropower generation. So renewable energy generation overall rose more than 19%. So coal, on the other hand, accounted for only 65% of total power output versus about 70%, which of course reflects many things.
At the same time, apart from the reduction in coal, the increase in renewables. A Bloomberg News report says that this is the first contraction in demand since 2020, when the pandemic obviously brought the economy to a halt. India's electricity demand usually peaks during the month through June as more air conditioners are switched on.
India has also not seen the peak demand increase this year, it was projected, and if it remains below last year's 250 gigawatts, it would be the first drop in at least two decades, according to Bloomberg. So I reached out to Vibhuti Garg, Director for South Asia at the Institute of Energy Economics and Financial Analysis, and I asked her how she was seeing the challenges of power management, given also the spike in renewable energy capacity, including by companies like Adani, which are now claiming close to 15 gigawatts of solar power generation capacity.
INTERVIEW TRANSCRIPT
Vibhuti Garg: So, as you rightly pointed out, India has been experiencing huge peak demand, and we were anticipating that it might touch 260–270 gigawatt this year, as per the estimates from Central Electricity Authority. But yes, we have not touched those numbers. Like last year, we did hit 250 gigawatt, but comparatively this year has been, although we did experience heat waves, it's been much cooler with onset of monsoons early during the year.
But as a result, I mean, in terms of — if you will see the composition of the energy mix — out of the total 450, more than 450 gigawatt, coal still plays about, you know, 50 percent share. But in terms of generation, it's still high. Around 70 to 75 percent of the generation is still kind of being met from coal. But the share of renewable energy generation, which was lower to 7–8 percent till about, you know, two years back — the share of renewable energy generation has gone up tremendously from 12 percent, to 17 percent now.
And at this time of the year, even hydro starts playing a big role. So, we do have a lot of hydro coming in to meet this incremental demand at this time of the year. In some parts of the country, there is rain, but at the same time, the humidity levels are so high, so there is an increase of air conditioning load.
But if you will look at our load curve, it's kind of a dot shape curve, I would say. The time of the peak which happens is now changed, and it usually is now happening — we did some analysis for this year — it's around 3 p.m. when the highest peak demand happens, which kind of coincides with availability of solar generation, barring very cloudy days when there is no solar available or less solar available.
But most of the days, solar can really meet that afternoon peak which is happening. It's only the evening peak which is now high, and that's where renewables may not play a big role. And that's where still coal or even gas will have to play a big role. But if the battery storage deployment happens in India, and if we are increasingly able to store the cheaper renewable energy which is available during the day from solar or in the evenings, capacity can play a big role. I think that's how we can manage meeting the peak demand, which is now shifted to afternoon. And then the evening peak demand.
Govindraj Ethiraj: And what time is your evening peak demand, or what is the time that you define as evening peak demand?
Vibhuti Garg: It's usually happening around 8 or 9 p.m. Again, because, you know, when people get back home, there's a huge air conditioning load on the grid. When people are back home doing their either home shows as well as other people, with the increasing humidity levels, use of air conditioners — which used to happen like 8 to 10 hours a day, probably during night mostly — but now people just don't switch off their ACs. It runs 16 to 18 hours. Despite having high electricity bills, people just can't. You know, onset of monsoons is also a double-edged sword, where, you know, there's increasing humidity levels — still increasing the demand load in India.
Govindraj Ethiraj: So, you know, we've seen the commissioning of a lot of solar energy capacity, and every year we are commissioning at a fairly high pace. The Adani Group recently commissioned some more — now they're almost at 15 gigawatts, which I think makes them the largest private player. But my question really is that if we are going to be producing or adding so much solar capacity, does it really help, given the nature and tenor of our power consumption, going by what you've just said? What happens when things go off — as in, we've seen surges and problems in Europe, for example, quite recently — and this could happen here too. So what is the— I mean, we should do all this because something would happen, right?
Vibhuti Garg: Yeah, I think those kinds of blackouts are inevitable, even if you have a share of more fossil fuels as well. Because in India also, we do have a national grid — it's not that we can isolate the grids, we can do that — but there'll be a lot of resources.
And that's why the role of flexible generation sources becomes very, very critical. If there are technologies which can be ramped up and ramped down fairly quickly, manage this variability in load — I think those are the kind of solutions that are required to again manage the load better or penetration of these variable technologies better.
So right now, we don't have many solutions, but I think battery storage will be very, very critical to help manage these kinds of fluctuations better in the Indian grid. You also have to recognise there's still a lot of captive generation that happens. So, we do have work — more than 80–90 gigawatt of captive power, which is not on the grid, which is outside the system — and that is also huge. So it's something that can be, I would say, a demonstrative case that there is a huge system that is being operated without the national grid as well.
Govindraj Ethiraj: That's feeding the industry mostly, right? If not entirely.
Vibhuti Garg: Mostly the consumers, the commercial and industrial consumers who don't take power from the grid. And increasingly more, we are seeing most of the consumers who have set up net zero targets — they are buying directly through open access or are setting up captives or group captives, even for renewable energies. And this behind the metre — like the PM Surya — this scheme.
So now there are discussions happening: how do we again make power more decentralised, so people are meeting that power in a more decentralised manner? So we will see a lot of developments happening there as well.
Govindraj Ethiraj: Right. We thank you so much for joining me.
