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Markets Shift Worldwide, India Could Stay Weak

The markets are generally on edge as the regulators, Sebi and RBI are now openly turning on the heat and cracking down on a range of companies under their respective jurisdictions

By Govindraj Ethiraj
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Markets Shift India Weak
On today’s episode, financial journalist Govindraj Ethiraj talks to Anuj Gupta, Head of Commodities and Currencies at HDFC Securities as well as Sheetal Sapale, VP Commercial of Pharmarack.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (00:50) Markets Shift Worldwide, India Could Stay Weak
  • (02:24) Gold Is Holding Highs Of Last Week, Could It Rise Further?
  • (07:14) Market Regulator Says They Are Tracking Manipulation As They Stay Committed To Fight The Froth
  • (09:26) Adani Acknowledges Hindenburg’s Contribution To Change In Strategy
  • (10:58) Popular Medications Have Dozens Of Variations. Why Companies Love Them

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.


Equity Markets Weak On Global Cues

With Wall Street sinking on Friday and no real positive triggers on the horizon, Indian markets turned weak on Monday.

The BSE Sensex fell  617 points to end at 73,503 while the Nifty50 shed 161 points to close at 22,333.

Bank stocks are under pressure in general though large cap stocks were trading lower.

The markets are generally on edge as the regulators, Sebi and RBI are now openly turning on the heat and cracking down on a range of companies under their respective jurisdictions.

While a crackdown on the gold loan business of a non bank finance company may be restricted to gold, the problem is that the loans taken against that gold are often going to stock markets and so on.

Both regulators are trying to cool the markets and find out what is fuelling the exuberance whether in borrowing or in buying stocks. While exuberance is a shifting target as we will shortly come to, manipulation is not.

There are emerging instances clearly on manipulation of stocks and sub-legal practices in cornering shares issued during IPOs. More on Sebi in a moment.

All this will weigh on the markets in coming days as more skeletons tumble out of various cupboards. At least one hopes they do not.

Meanwhile, US markets continue to be weak into Monday and that will surely weigh down sentiment across the region.

Gold Prices Steady After Record Highs

Gold prices were steady on Monday after hitting several, almost inexplicable record highs last week.

Reuters reported that spot gold gold was little changed at $2,176.30 per ounce, after hitting a record high for the fourth consecutive session on Friday at $2,194.99 

"Gold continues to shine on expectations around the Fed cutting interest rates this year. Market could be waiting for the incoming U.S. inflation data," one analyst told Reuters.

U.S. consumer price inflation (CPI) data for February is due on Tuesday. India’s inflation is also out on Tuesday.

Speaking of which, the expectation is that India’s CPI will come near 5% for February as compared to 5.1% in January.

Gold prices have risen more than Rs 4,500 in a month's time to cross Rs 67,500 or thereabouts. The rise has been termed unusual by many traders across the world.

I reached out to Anuj Gupta, Head, Commodities and Currencies at HDFC Securities and began by asking him first, what had brought gold here and second, obviously, where it was headed, at least in his opinion.


Meanwhile Crude oil is holding  steady around $82. The pulls and pushes are the same, lower production but lower demand as well and the low demand offsetting the lower supply and keeping prices down.

Sebi Grapples With Froth

Market exuberance is a difficult one to pin down. Many people I know who have been investing in the market for years and even decades have been selling out on the way up or moving to cash as they say.

Many were selling in October and November when the benchmark indices saw their big moves.

In retrospect, they could not call the high. But presumably they were happy with the gains they had already made, particularly if they entered during Covid lows in 2020 or for that matter much earlier.

For a market regulator this is a daily moving target.

And market regulators then tend to look for those who are either fuelling the exuberance or benefiting in a way that is asymmetrical to the rest of the market.

The Securities & Exchange Board of India said on Monday that there may be pockets of irrational exuberance in the Indian equity markets, referring to concerns over stretched valuations of small-  and mid-cap stocks and large inflows into mutual funds investing in these segments, Reuters reported.

Sebi has also suggested that mutual fund trustees look at whether lump sum investments into the small- and mid-cap funds are appropriate.

The bigger exuberance, as we have been discussing here as well, is clearly in the small cap and mid cap stock space which has seen phenomenal growth in the last year

Sebi chairperson Madhabi Puri Buch on Monday said the regulator is seeing "signs" of price manipulation in the Small and Medium Enterprises (SME) segment.

The manipulation is both at the Initial Public Offering (IPO) and also in trading, Buch said, advising caution to investors.

"We do see the signs (of price manipulation), we have the technology to do it. We are able to see certain patterns. I'd say it is still on the kitchen table, it's not yet gone into the oven," Buch said on the sidelines of a conference in Mumbai.

She said the investors need to understand that the SME segment is different from the main board and it is necessary for Sebi to underline the same in terms of the rules on disclosures which are made to investors.

Regulations governing the SME segment, the disclosures, and therefore, the nature of risk are all different, she added.

Adani Acknowledges Hindenburg Contribution

In an interesting turn of events, the Adani Group has now acknowledged the role of the Hindenburg Research report which knocked off over $100 billion of the companies market capitalisation in redirecting its focus towards its core business.

Adani Ports MD Karan Adani, also son of Gautam Adani told Business Standard that the entire situation provided an opportunity for the group to redirect its focus towards its core businesses and also acknowledged the significance of “perception and brand” value in the aftermath of the Hindenburg affair.

He also added the allegations from Hindenburg Research and their impact on Adani Group are now considered “way back in the past. 

Hindenburg, an investment research firm based in the US  in January 2023 accused Adani Group of “stock manipulation and accounting fraud”, along with improper use of offshore tax havens and concerns over high debt. 

Adani says they  looked at some of the decisions that we were postponing and, among other things, divested  its non-core business, Adani Capital, a non-banking financial company (NBFC). 

Adani highlighted the current financial year as one of the best for Adani Group, pointing out how it has been able to raise equity during the past months. He also reiterated that whatever was raised (by Hindenburg) was already disclosed by us a long time back. In all our prospectus, if you see, it was already disclosed. So, it was not something new,.``he told Business Standard

Why Pharma Companies Love Mother Brands

You may have used Shelcal, in general a calcium supplement mostly for bones and joints over the years. But you usually have to do some research to figure out which Shelcal you really need.

Because there are at least a dozen Shells, ranging from XT, HD, CT, OS and even MOM and JOINTS, which are self explanatory.

Or take the painkiller called Zerodol, usually for some kind of muscle linked pain. But there is one Zerodol and there are at least 11 variations on top of that.

They are Zerodol, P, PT, TC, S, OD and SPAS. Each extension means a different thing and has a different application.

To you as a consumer, this might sound a little confusing but the doctors who prescribe them, as they should, are quite clear what they are.

And for the pharmaceutical companies that produce these increasing numbers of extensions and alphabet soups, they reflect what Sheetal Sapale of Pharmatrac called a mother brand and extension strategy which is paying off well.

There are almost 381 such brands and their brand extensions with a turnover of over Rs 100 crore. Other top ones include Monocef and Glycomet, medicines for antiinfectives, diabetes and so on

Interestingly, while MNC pharma companies only make up around 16% of the Indian Pharma market, they contribute to 22% of the mother brands which would suggest that they have been innovating faster here.

Shelcal belongs to Torrent Pharmaceuticals while Zerodol belongs to IPCA Labs.

I spoke with Sheetal Sapale and asked her how the mother brand strategy works from the manufacturers point of view and why it exists in the first place and could consumers be confused with the many fine choices.


Hyundai Says Will Step Up India Investments

We spent some time speaking yesterday about Tesla who is noncommittal to investing in India right now if it has not put the project on ice for now.

Meanwhile, Korean auto major Hyundai said it will continue to invest in production capacity, setting up new manufacturing units, introducing new products and technologies to strengthen its presence in the Indian market, the ET reported.

India is a focal market for the company, its India managing director Unsoo Kim said during the launch of a new version of the Creta SUV.

Hyundai India has said it will invest around Rs 32,000 crore in Tamil Nadu and Maharashtra towards capacity expansion, launch of new products and setting up battery pack assembly units.

 Hyundai too registered best-ever sales of 602,111 units last year, said the ET.