Markets Seek Direction In The Face Of Erratic Global Flows
Last week ended well for the stock markets which are clearly searching for direction following the renewed uncertainty in the US bond markets
On Episode 590 of The Core Report, financial journalist Govindraj Ethiraj talks to Poorvi Chothani, Founder and Managing Partner at LawQuest.
SHOW NOTES
(00:00) The Take
(04:21) Markets seek direction in the face of erratic global flows
(06:38) Monsoons hit the earliest in 16 years in bittersweet news
(08:18) India GDP may have picked up last quarter, thanks to stronger rural spend
(09:44) India has a new oil find in the Arabian Sea
(10:47) What does the US Government on international students in universities like Harvard mean?
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 Monday, the 26th of May, and this is Govindraj Ethiraj, headquartered in Broadcasting and Streaming from Mumbai, India's financial capital.
The Take: Trump's tariff threats return, India and the world need permanent trade resets
India and the United Kingdom signed a much-delayed and debated and discussed free trade agreement or FTA on the 6th of May, that's earlier this month.
The agreement would make some 99% of Indian exports to the UK tariff-free, even as India will cut tariffs on British imports into India over time, think whisky. An apparent maker who exports a substantive part of his products to the UK told me yesterday he was expecting it to take anywhere between a year to 15 months for the agreement to actually materialise. At that point, he expects his exports would go into the UK with zero duty as opposed to the average of 11% or so right now.
So, it's a long way off. Now, this is usually the time tariff deals take to finally iron out, given the sheer number of items involved and the issues that surround them. Take India's own tariff negotiations with the US, supposedly on fast track, but for entirely expected reasons, taking time.
Mostly because India is not offering up the entire market on a zero tariff platter. It has never done that. It is unlikely to do that today, except for a few cases, of course, think again of whisky.
And then comes Donald Trump's renewed threat at Apple saying they cannot manufacture iPhones in India. If they insist on doing so, then those imports into the US will be taxed at 25%. So, this is a company-specific threat as opposed to a country threat.
Presumably, Apple will have some company in this latest round of not-so-friendly fire. Trump over the weekend also announced that he was going to impose a 50% tariff on imports from the European Union. The 50% is more than twice the size of his earlier threat of 20%.
His argument, our discussions with them are going nowhere. The block is very difficult to deal with. And this could kick in as soon as next weekend.
The Economist says Mr. Trump's announcement was a particular blow to European officials who had been feeling cautiously optimistic. According to an internal memo from May 14, seen by the Economist, they had believed that there was a chance of de-escalation since America had begun to see the consequences of the President's initial tariff rampage. So, who is to blame here?
Obviously, the EU officials were delusional enough to believe that the problem was on the verge of disappearing. It was disappearing only because they shut their eyes. And this, of course, is the case with all countries.
India thought a deal appeared to be on the horizon till the highly specific threat against Apple warning it against manufacturing in India. Why, one wonders, is India being singled out so specifically, given that it is not an antagonistic power like China, at least from the US lens? The events of the last week have reinforced the fact that trade uncertainty is not going away.
This is not the boy who is crying wolf. This is the boy who is announcing the arrival of it. Businesses in India must accept that they should now not bank on hope and Trump's memory for last minute deals.
Even a deal that is actually signed may not materialise. And one that is signed, like in the case of the UK FTA-1, could take a year or so to actually go into effect. An alliance survey of 4,500 businesses, including in China, released last week showed that most exporters were lining up new markets for their products even if tariff levels eased off.
Not that everyone saying this is not hoping otherwise, but realisation is dawning across the world that choices are limited and time even less. And US trade uncertainty will continue for several years. The apparent Indian exporter told me some of his key competitors in the UK market are Turkish manufacturers.
Going level with them for him would mean that India has to move faster on implementing the UK tariff deal. Businesses, meanwhile, have to accept that last week is or was the final straw. And they have to think of permanent new strategies rather than ad hoc ones aimed at weathering it out.
And that brings us to the top stories and themes for the day.
The stock markets seek direction in the face of erratic global flows.
The monsoons have hit the earliest in 16 years in bittersweet news.
The rupee sees the best single-day gain in two years.
India's GDP may have picked up last quarter thanks to stronger rural spend.
India has a new oil find in the Arabian Sea.
And what does the US government move to ban international students in universities like Harvard mean?
The Markets Seek Direction
Last week ended well for the stock markets, which are clearly searching for direction following the renewed uncertainty in the US bond markets, which, of course, is causing distortions in capital flows once again. The week as a whole was negative for Indian indices, down around 0.75% overall. Now, capital is leaving the US, not all of it, of course, for better opportunities in other markets, including emerging markets like India.
But interest rates are high because the US is paying more by way of interest to raise funds because of uncertainty there. So the 30-year Treasury bond yield touched a high of 5.161%, its highest level since October 2023. And the rate on the 10-year Treasury note at one point crossed 4.6%. All of this is attracting funds back to the US again. On Friday, the BSE Sensex climbed 769 points to settle at 81,721 and ran on a strong undercurrent, though, through the trading day, unlike a few other days earlier in the week. The NSE Nifty 50 was also up 243 points to close at 24,853. The Nifty Mid Cap 100 and the Nifty Small Cap 100 indices were up about 0.6% and 0.8%. A note from Kotak Security says foreign portfolio investors continue to be net cash buyers to the tune of about 10,000 crores, that's about $1.2 billion to date in May 2025. But it added that the future was not so bright, with fourth quarter earnings that the fourth quarter is the fourth quarter of the previous year, 24-25. Earnings season remains uninspiring, with aggregate earnings growth of the Nifty 50 Index at about 5.8% year-on-year till now. Meanwhile, in other signs of market confidence and flows, the rupee jumped on Friday to post its biggest single-day gain in more than two years.
The rupee closed at Rs. 85.21, Pese against the US dollar, up about 0.9% on the day, which is its best one-day gain since November 2022. For the week, the currency rose 0.3%, as the rally helped it recover from the dip past 86 to the dollar in the previous session according to Reuters, which also pointed out that Asian currencies rallied by as much as 1% as the dollar index fell 0.5% to 99.3, that being the weakest level in a fortnight.
The Rains Are Here
There is an old joke where a concerned citizen calls the meteorological department and asks, can you tell me when it is going to rain? Now comes the response. How can you be so sure, says the citizen, you're always wrong.
Well, it's raining outside right now, says the person who picked up the phone at the department store. Well, it's raining right now here in Mumbai as well, and in many parts of the country, and the monsoon rains have hit the coast of Kerala on Saturday. That's eight days earlier than usual.
So the arrival of the monsoons on May 24th is the earliest since May 23rd, 2009, which is the earliest in 16 years. But it's a bittersweet development. Sweet because it means relief from the heat waves and a shorter summer, and of course the prospect of better harvests for crops like rice, cotton and sugarcane.
Bitter because businesses ranging from air conditioning to beverages have had to cut back their output to adjust their stocks, which they had bumped up in anticipation of a long and hard summer. That prediction too came from the meteorological department, by the way. So businesses depend on the weather too much more than we might think on a normal day.
So the monsoon delivers about 70% of the rain that India needs to water farms and replenish aquifers and reservoirs, according to the Reuters compilation, which points out that nearly half of India's farmland without any irrigation cover depends on the annual June to September rains to grow a number of crops. At this point, the monsoon has covered Kerala and parts of neighbouring Tamil Nadu and Karnataka, as well as parts of the northeastern state of Mizoram, according to the Indian meteorological department. And of course it's raining here, a phase referred to as pre-monsoon showers, though unusually the pre-monsoon and monsoon showers appear to have merged or merged.
GDP Projected Higher
India's economic growth likely picked up in the last quarter, a Reuters poll of economists has said, in part from strength in rural spending related to better agricultural output, even as urban spending mostly remained more subdued. GDP for India likely grew about 6.7% year-on-year in the Jan to March period, from 6.2% the previous quarter, according to that median forecast by Reuters of 56 economists, and their forecasts ranged from 5.8% to a very ambitious 7.5%. Economists at Citibank said that resilient agricultural activity continues to bode well for rural consumption, adding that they remain bearish on urban consumption in the first half of the current fiscal year, with a recovery driven by policy stimulus. Standard Chartered's head of India economic research said that any growth improvement was mainly driven by the positive impact of net indirect taxes as subsidy payments were significantly lower during the period, according to Reuters, which also said that economic activity as measured by gross value added, that's GVA, considered a more stable gauge of growth and excludes indirect taxes and subsidies, expanded about 6.4% in the first three months of 2025, compared to 6.2% in the previous quarter. In general, without stronger domestic demand, the GDP growth will continue to rely heavily on government spending as it has in recent years.
A New Discovery For ONGC
The Oil and Natural Gas Corporation is reporting offshore oil and gas discoveries in the Mumbai offshore basin. The discoveries have been made in blocks awarded under the Open Acreage Licencing Policy regime, ONGC said in its fourth quarter earnings statement, according to a report by the PTI. Mumbai offshore is home to India's biggest oil and gas fields. Mumbai High, or Bombay High, as it is once called, is located about 160 km off the west coast of India in the Arabian Sea and is the largest offshore oil and gas field for India.
Personnel working on rigs in Mumbai High, for example, helicopters from Mumbai City. Mumbai High accounts for about 35% of India's domestic oil production and 18% of its output, according to that PTI report. We'll have more context on this find, since it is a significant one, or seems like a significant one, later this week on the core report.
Remember, India imports more than 85% of its oil needs and about half its natural gas requirement.
The Future For International Students In America
The Trump administration on Thursday said it revoked Harvard's international student certification because it had failed to meet its demands, including a request for records of student protest activity dating back five years. A federal judge, however, temporarily blocked this manoeuvre on Friday, which obviously sets up another legal battle between Harvard and the government. Harvard had sued the Trump administration less than 24 hours after the Department of Homeland Security moved to bar international students.
So the problem, of course, goes beyond Harvard and also once again highlights the sheer number and scale of international students present across the American higher educational system, particularly at some of these prestigious universities. Across the nation, enrolment from overseas has doubled in the last 25 years, with more than 1 million international students now studying in the United States, according to a New York Times report, which also adds that while international students make up slightly more than 5% of university students nationwide, some of the nation's most selective schools rely far more heavily on them. At New York University, for example, home to about 60,000 students, a third are international.
At Columbia, about two in five come from overseas. And at Harvard, about 25% or more than 25% come from outside, says the New York Times. Many students who complete degrees in the United States, of course, stay there to build their careers, whether in academia or private industry.
And that's precisely the reason many of them go there to start with. However, the Harvard action could also spread to other universities. The president of the Massachusetts Institute of Technology, or MIT, wrote in a message to her campus saying that this was a grave moment, as quoted by the MIT.
So there are two sets of questions that arise. One is, what happens to students if they're faced with a notice like this, particularly from India? And second, what is the near to medium term future for U.S. education, particularly such universities in such a context? I reached out to U.S.-India immigration lawyer, Poorvi Chothani of LawQuest International, and I began by asking her how she was reading the latest developments.
INTERVIEW TRANSCRIPT
Poorvi Chothani: First of all, I want to tell you on what basis that they have terminated Harvard status on the student exchange visa portal. So basically, after 9-11, the U.S. government to track international students in the United States developed this online portal, and all institutions who want to grant admission to foreign students have to be registered on that. And for that, they have to have certain compliance protocols.
Without that, you cannot. You cannot issue an I-20. You cannot pay what is known as the SEVIS fee.
You can't do any of that. So because of that, that's a big deal for every university, including Harvard. And what the Department of Homeland Security did is they cancelled the SEVP registration.
And they cancelled it based on their allegation that Harvard is not sharing information with them as required under the SEVP system. And that's what has happened just now. They wanted to cancel the registration, but the judge has given a temporary restraining order, which we in India call an injunction.
So that's where we are at now. So at the moment, the students are safe, but we don't know for how long.
Govindraj Ethiraj: Right. And you're saying that at any point of time after 9-11, the status of a foreign student in the U.S. was always, to some extent, fragile, given the fact that the Department of Homeland Security could cancel their registration at any point of time, relative to, let's say, before 9-11.
Poorvi Chothani: So yes, from 9-11 onwards, I wouldn't say that all student status in the United States was fragile. Yes, it was subject to monitoring, and it was subject to checks and balances, for sure. In the past, the Department of Homeland Security has used this SEVP cancellation to get after fake universities and universities who breach international student protocols.
So it has been rarely used in the past, and never against such an august institution like Harvard, to the best of my knowledge.
Govindraj Ethiraj: Right. So at this point, assuming, let's say, the restraining order holds, how could things evolve from here on? Could restraining orders last for a long time?
Because I'm assuming it will be back in court.
Poorvi Chothani: Yes, it will go back to court. And what is going to happen is that the whole premise of this litigation is based on a challenge of the constitutional fundamental right under the First Amendment, that is, freedom of speech and freedom, I mean, under the First Amendment. So basically, that is the constitutional question that should be addressed.
But this court, this court where they've granted the injunction, is not going to go into the constitutional issue, because before they address constitutional issues under U.S. jurisprudence, they must see whether the case stands at all. So they are going to likely, most likely dismiss the case based on technical issues, like they didn't follow due process, they did not do this, they did not do that. So on those technical issues, they're going to dismiss this case, is my reading of the case.
But the fundamental issue, the constitutional issue, will not be addressed by this court.
Govindraj Ethiraj: Right. And how do you see things going forward? I mean, we're talking about students who are there, who are maybe because of the continuance of the restraining order or the dismissal of the order by the Department of Homeland Security are safe.
How do things look ahead?
Poorvi Chothani: So they definitely should be in touch with their DSO. Every university has a designated student officer for international students, and they should be in touch with the DSO's office to make sure that everything is fine. And even when they go for their visa, they will need to pay their SEVIS fee, which is a fee under the SEVP.
When they pay that, they will be able to check whether that university is there or not, whether it is a registered university or not. They have to be vigilant about what they're doing. My other fear is this, that visa officers, their decision may be coloured by what is transpiring at the administrative level and their visa adjudication may be affected.
That is not a good thing for international students who are applying for visas. That's not a good thing. When they go for their visa interviews, they should be very careful.
Their social media should be very clean because all this can create unregulated bias. Right. Because the foreign affairs manual which guides how visa officers should adjudicate may not be tweaked or may not be modified at all.
But these things that are happening could affect the officers. So students should be extra careful. And my advice is always work with a professional immigration attorney or somebody who can guide you through this properly, because travel agents, etc., are not equipped to do this. And this is very nuanced now.
Govindraj Ethiraj: Right. And of course, we are looking at it from an Indian point of view. But do you feel that the environment for international students as a whole is maybe not the best one going ahead for some time?
Poorvi Chothani: Yes, I am worried about that. And I'm worried that it is already impacting the number of students that are worried. The number of calls we are getting from students and their parents who are worried, even from students who are within the United States, that should they continue, should they transfer out, should they go to another country?
They're worried. It is going to have an impact. And I think in the short term, we'll see a dip in numbers.
But because the U.S. is still a very attractive destination and people know that administrations don't last forever, it's still a country that people aspire to study in. And their education system is fantastic.
Govindraj Ethiraj: Right. That's a positive note to end on. Poorvi, thank you so much for joining me.
