Markets Slide Down Again
High bond yields in the US, whatever the reason, are not very good for equity markets
On Episode 586 of The Core Report, financial journalist Govindraj Ethiraj talks to Mirai Chatterjee, Director at Self-Employed Women’s Association, or SEWA as well as K. Ramakrishnan, Managing Director - South Asia at Worldpanel Division, Kantar.
SHOW NOTES
(00:00) Stories of the Day
(01:00) Markets slide down
(02:37) Monsoon is arriving even earlier than the early projections
(05:01) How Chinese businesses are gearing up for a new trade world even if the tariff tantrum goes away
(06:55) How Gujarat-based women’s organisation SEWA wants to use blockchain to help women in poorer sections of society build their identities
(18:29) Tracking FMCG sales trends with Kantar…how categories like home care are showing unusual growth
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 Wednesday, the 21st of May, and this is Govindraj Ethiraj, headquartered in Broadcasting and Streaming from Mumbai, India's financial capital.
Our top stories and themes. The stock markets fall almost 900 points as valuation concerns resurface.
The monsoon is arriving even earlier than the early projections.
How Chinese businesses are gearing up for a new trade world, even if the tariff tantrum goes away.
How Gujarat-based women's organisation SEWA wants to use blockchain to help women in poorer sections of society build their identities.
And tracking fast-moving consumer goods sales trends with Kantar, how categories like home care are showing unusual growth.
The Markets Take A Dive
High bond yields in the United States, whatever the reason, are not very good for equity markets elsewhere, particularly emerging markets, because it usually means that funds will move back to debt assets, even though capital in general is leaving the U.S. at a higher rate than before. Now, that could be one reason for Indian markets falling further on Tuesday, the third day it fell in succession. Bond yields in the U.S. are high after Moody's downgraded U.S. credit rating from AAA to AA1. Over rising debt concerns last week, the 30-year treasury yield touched a little over 5%, that's 5.03% before retreating. That was the highest since November 2023. Foreign portfolio investors also sold on Monday, as did domestic institutional investors, all of which could be linked to profit booking, though the larger point is that there are not too many strong cues that could drive the market right now.
On major issues like tariffs, while signals are positive, the issue is still on pause and therefore unresolved. Most of the macroeconomic signals are looking positive, and you could argue that's already been priced in, at least relatively, including rains, which are coming even earlier than the early date announced, and quite literally. And as I record this, it's thunder and lightning and raining outside in Mumbai, and it looks like it's going to rain for a few days.
Also, we saw a roughly 4% jump in the benchmarks after the ceasefire, leading once again to questions of high valuations. On Tuesday, the Sensex fell about 872 points to close at 81,186, and the Nifty 50 was down 261 points to close at 24,683. In the broader market, the Nifty mid-cap 100 and small-cap 100 were also down 1.6 and 0.9, or just under 1%. Back to the rain. The India Meteorological Department, or IMD, on Tuesday said the southwest monsoon was likely to hit Kerala within the next four to five days, obviously ahead of its normal onset days of June 1st. The weather department had earlier predicted the monsoon would reach Kerala by May 27th.
Now, this is apparently the earliest onset since 2009, when it hit on May 23rd, according to IMD data quoted by Business Standard. Once it hits, the monsoons race across and cover the whole country by July 8th, and run till around mid-September, that's if everything goes well. Heavy rains have battered Bangalore, meanwhile, India's IT capital, once again, exposing the weak infrastructure and poor state of roads, compounded by thousands relying on private transport to get to their destinations.
In the Northeast, Assam's Guwahati was submerged after overnight downpour, leading to widespread flooding in residential areas and major roads, according to reports. Meanwhile, we have a larger perspective coming up later in the show on consumer demand trends, as seen in the previous quarter as well. Yes, it could all link to good rains, but we'll come to that.
But an interesting report in the Economic Times says that companies are cutting production of summer consumer products, such as air conditioners, beverages, and talcum powders by up to 25% to adjust inventory following slow sales in April and the first fortnight of May. These companies were preparing and geared for a long summer, particularly following forecasts of intense heat waves. Be that as it may, companies told the Economic Times that most of them had bought, that is, retailers had bought excess stock by March following that early forecast, and to prepare themselves, particularly after 2024, where we saw unprecedented heat waves leading to record demand, for which, of course, companies were not prepared.
So forecasts do matter, particularly if they don't go right. The head of appliance business at Goldridge told the ET that they've cut production of ACs by about 20% to reduce overall stock. And he said that Southeast and West reported a 25 to 30% drop in sales in April and May compared to last year.
And ditto for beverages, where production lines are running in fewer shifts than before, and April, May, and June, which should have seen peak purchases, or almost 40 to 50% of annual sales of summer-centric products did not, according to that ET report. Imami, the company which makes Dermicool and Golden Beauty talc, said in a commentary last week that for the first quarter of 26, that's the April, May, June quarter, summer was impacted by sudden rainfalls, and southern and eastern regions were more impacted.
China's Export Options
The question that we've been posing at The Core Report is what would companies, particularly in the exporting space, do here on, given that we are staring at a level of trade uncertainty not seen before. Responses vary. It is quite natural to expect that no business or business person would want to be caught so off guard as they have been in recent months.
And while they might pray and hope, as many evidently are, that the United States tariff scheme will fade away to manageable levels or fade away altogether, many are also finding options. CNBC is reporting from a private survey that the intense trade war with the US has left lasting scars on Chinese exporters, with many looking to diversify away from the US despite the temporary tariff reprieves. A poll of 4,500 exporters across several major economies by trade insurer Alliance Trade found that 95% of Chinese exporters surveyed are planning on, if not already, doubling down on exporting to markets outside the US for their goods.
Obviously, this is intent, but as intent, too, it's worth noting. The US-China decoupling remains a likely scenario over the medium term, the survey said, even as Chinese exporters look to pivot away from the US and American firms accelerate efforts to shift production out of China, says that report. Alliance Trade estimates say that even after that temporary tariff reduction following a deal between China and the United States in Switzerland earlier this month, the US trade-weighted tariff rate on Chinese goods is at 39%, well above the 13% rate applied before the second Trump administration.
A senior economist at the Economist Intelligence Unit quoted in that CNBC report says Chinese exporters in the coastal city of Ningbo are undeterred by the truce and sticking with their plans to go global. For Southeast Asia, companies are showing increasing interest in setting up production in Indonesia, according to that analyst, and perception was mixed about Vietnam with concerns over rising costs weighing against an attractive labour force, according to that CNBC report.
Blockchain Is Helping Women Build An Identity Base
Welcome to Build on Blockchain, where we look at how technology is being used in places and ways most people wouldn't expect. Last week, we spoke with Chetna Gala Sena from the Mandeshi Foundation, who walked us through how blockchain wallets are changing how rural women in India are accessing loans to move some of the usual roadblocks and creating space for something new in how credit is delivered. This week, we look at health, identity, and public systems.
Joining me is Mirai Chatterjee from the Self-Employed Women's Association, or SEWA. The Gujarat-based SEWA has been organising women in the informal economy for decades, women who cook, clean, care, sell, build, farm, and rarely have the paperwork to match the value of their work. Government programmes exist to support them, health insurance, safety nets, welfare schemes, but in practice, access often breaks down and oftentimes linked to identity.
I began by asking Mirai Chatterjee as to why this is happening and also to tell us a little bit about SEWA and what her or her organisation's principal challenge is. Mirai, thank you so much for joining me. So before I dive into the financial inclusion work that SEWA is doing, can you tell us a little bit about the kind of work that you're doing, that's one, and how many people you support and in what way today?
INTERVIEW TRANSCRIPT
Mirai Chatterjee: Sure, good to be here. Well, there's SEWA, and then there's several different sister organisations and entities, one of which I head. So SEWA, as you know, is a national union and also a movement now of 32 lakh women workers in the informal economy spread across 18 states.
SEWA gave rise to several programmes, which in turn gave rise to several entities, mostly cooperatives, which provide financial services, healthcare, childcare, and many more. So I'm the lead for our social protection programme, which includes healthcare, childcare, and insurance. And as I said, all these are done through cooperatives, which are sustainable.
They are used, run, and managed by the informal women workers themselves.
Govindraj Ethiraj: Right, and tell us about some of the challenges that you face or the path that you see in building out or expanding the base that you have and in ensuring higher integrity in the transactions that people do who are part of your system.
Mirai Chatterjee: Well, of course, the biggest challenge, and if I may say the first building block is what we at SEWA call organising, which is building unity and solidarity, building the sisterhood. And once that unity, solidarity, and sisterhood is built, then all other programmes, including our financial services are built upon that because trust is the basis. And now with a 53-year track record, our members, and we are grateful for this, our members trust us implicitly and save in SEWA Bank or insure with Vemo SEWA, our insurance cooperative, or take health services, health education, health awareness, and others from our health cooperative, which also provides low-cost medicines and Ayurvedic medicines.
So the basis of all this is trust, which of course is hard won and built over years of organising and building membership-based organisations like cooperatives, as I said, which the women themselves run.
Govindraj Ethiraj: Right, and if you were to now pick up financial inclusion as one aspect, or for that matter, health services, how are you working on creating secure digital identities and creating the linkages between the services or products that are offered in the marketplace with their needs?
Mirai Chatterjee: Well, one of the things that we found is that the government, both the state government and the national government have many poverty alleviation programmes, including public health programmes and allied programmes like pension, food security, and so on. But the issue is, first of all, that women don't know about them, so they need the information. And the second issue is that they need support in navigating all these systems.
And perhaps the biggest challenge of all is the documentation. A lot of documentation is required for our public schemes, our welfare schemes, and of course now more and more people have Aadhaar cards, but by the way, not all of them do. And there are several barriers to accessing an Aadhaar card or some other document, including the fact that they don't have birth certificates, marriage certificates, and so many more other issues.
Another major issue is that when they do with all this difficulty get hold of the documents, sometimes they are misplaced, sometimes there's a fire and they are lost, or they move houses and then in that process it's, and by the way, moving houses are very common, they are somehow misplaced or lost in the whole process. So for us, what's very important is first of all to inform our members and help them navigate the system and collect the documents. And we do this through what we call Seva Shakti Kendras, which are information and support hubs embedded in the communities, in urban mohalas, neighbourhoods, and also in the villages.
But as I said, safeguarding the documents and the documents should be in women's hands, in their control and digital, this is very important for us.
Govindraj Ethiraj: How does blockchain help in your understanding in bridging some of these gaps?
Mirai Chatterjee: Well, we were very fortunate to link up with the Algorand Foundation. Mr. Anil Kakani reached out to us and we attended one of his seminars, conferences in New Delhi a couple of years ago. And frankly, we had no idea about blockchain and also less idea how it would be useful to women at the grassroots level, our members.
And then we started a dialogue. And what we found is that blockchain could be a great use to women at the grassroots by digitising their documents, by connecting them to DigiLocker, which of course we've done, by creating an app. So our Aagevans or grassroots women leaders will actually facilitate this whole process of connecting to welfare schemes, and can keep track of which member has which document at which time.
Frankly, all of that is being done manually in registers. It takes time, it takes a lot of effort and it limits how we can expand and reach out to more and more women. But I think one major thing that attracted us to blockchain was the democratisation of data.
Data in women's control, data that is safe in their DigiLocker and that enables them to access all these schemes on one hand. And on the other hand, as I mentioned, to streamline our processes, be more efficient and reach more and more women.
Govindraj Ethiraj: So tell us about the digital health passport. As in, what are the main points of use? As in, is it frequent visits to doctors?
Is it one-off hospitalisations? What's the normal nature of interaction with the health system? And where typically, I guess, the lack of documentation shows up.
Mirai Chatterjee: Sure. So first of all, we are involved in the business of primary healthcare, our health cooperative. And as government comes more and more into the public health space, which we very much welcome, our role is more health education, health awareness and what we call referral, which is quickly identifying patients who need to be taken for referral to secondary or tertiary care hospitals, either at the block level or in Ahmedabad city or wherever the nearby big city where there's a tertiary hospital.
And so that's one of our main roles. And there's where PMJ comes in, Pradhan Mantri Jana Arogya Yojana, which many of our members have been in the poverty sector, but they need all the proper identification, they need their cards, they need their Aadhaar card and so on. And I think that's where blockchain comes in because again, these cards, not only do we help them access them, but then they're also kept safely in their own digi locker.
So this is just one example and it's not just in health. We also link our members with the pension programme, widow's pension, PDS, the public distribution system and the whole plethora of welfare schemes that the government has currently.
Govindraj Ethiraj: So in a way, I mean, from identity to market efficiency or finding, I mean, creating the marketplace for efficient transactions and realisations. What are the kind of partnerships that you see going forward or innovations that you've seen now in the context of blockchain? Particularly to ensure that there is transparency, there is trust.
Mirai Chatterjee: So as I said, I think the experience with Algorand Foundation has been a really solid one and seeing the experience, VIMO SEWA is next in line, our insurance cooperative and so is SEWA Cooperative Federation. They would like to work more with Algorand and similar organisations, but as equal partners. So that's really important for us.
We've also had some interaction with the Infosys company and they have also helped us think through how we can digitise and also computerise our services and insurance much more. That was a little bit in the past. So these are some of the partnerships that have been solid so far and we've learned a lot from them and I believe women have benefited from them.
So we are looking for these kinds of partners who will join hands with women at the grassroots, as I said, as equal partners so that we can mutually learn and grow together.
Govindraj Ethiraj: Mirai, thank you so much for joining me.
Mirai Chatterjee: You're very welcome.
A Direct Investment Roundup
Here's a direct investment roundup into India that is for now. Just when US President Donald Trump told Apple CEO Tim Cook not to invest in India, Apple supplier Foxconn has revealed it'll invest about a billion and a half dollars or over 12 and a half thousand crore rupees in its India unit as it shifts more manufacturing out of tariff hit China, according to Reuters. Elsewhere, two-wheeler maker Suzuki Motorcycle India laid the foundation stone for a manufacturing facility in Haryana, which will be developed with an initial investment of about 1,200 crore rupees.
The upcoming plant will have a capacity to produce 750,000 two-wheelers annually. In its first phase, the company said the plant is aimed more at domestic demand.
Tracking The Latest Consumption Trends
Research and monitoring agency Kantar tracks about 85,000 households in India across 97 categories, across food and beverages, personal care and home care. Kantar says the impact of inflation, looking back that is, on household FMCG consumption remains moderate as of the last quarter while volume sales grew about 4.6%. However, the pace of growth was slower compared to the 8% seen in Q4 of 2023. The big question for Kantar is, what is the outlook ahead since the markets among others are keenly watching to see if consumer demand is showing any signs of turning around as many are predicting and perhaps even hoping it will?
I reached out to K Ramakrishnan, Managing Director, South Asia World Panel Division of Kantar based out of Mumbai. And I began by asking him for his highlights of consumer trends and behaviour in the last few months.
INTERVIEW TRANSCRIPT
K. Ramakrishnan: There's definitely a slowdown in growth. I mean, it's almost to the extent of half the growth. It's still growing, unlike the doomsayers who say that it's all crashed and things like that.
There's still growth, but the growth is not as much as it was last year. It's perhaps at about 50, 60% of the growth that we saw in the quarter in the last year. And even if you take a map period of up to March, the trends are more or less in a similar range.
Now there are two, three factors which have contributed to this. One big factor is atta. So if you take the FMCG basket, about 68% of that is food.
And within that about 30% is atta. So the atta has the ability to swing the growth significantly. And atta growth has kind of dropped in this quarter and in the year as well.
And why is that? Because there has been on and off free wheat being given away, et cetera. Whenever there is excess of free wheat being given away, atta drops and things like that.
That's been one of the reasons why atta has dropped. And atta's drop has contributed to a significant drop in food and therefore overall FMCG. So that's from a food lens.
And within food itself, beverage also. See beverage saw a kind of superb rally over three years, right? Growth up and fundamentally led by cold beverages.
Significant growth over three years. But that growth has a bit slowed down at the moment. So that is another cost for the whole whole FMCG packet to be lesser.
Similarly, in personal care, we are seeing that personal hygiene has maintained a reasonable growth, but personal grooming has not. So when I say personal hygiene, I'm talking about soaps and hand washes and things like that. And personal grooming being does and hair oil and all of those things.
So there's a difference between these two. So among all the things FMCG, the only thing which I can say is a good story is home care. Home care has shown growth, which is even higher than what it was the previous year.
Not substantially, but at least higher. So that higher is primarily led by fabric care, which is either wash, detergents, or fabric conditioners or any of those put together. So that's what has led.
The others have been more or less like, if I take the other parts of home care, like let's say toilet, bathroom cleaners, insecticides, et cetera, they have been more or less at a similar growth as last year, but detergent and conditioners definitely have led the way. So in this overall picture, food brings it down, personal care slightly down, home care above. That's the overall picture as far as FMCG is concerned, from a sectoral lens.
Govindraj Ethiraj: What does that reflect from a behavioural point of view when you say that home care is showing greater spends?
K. Ramakrishnan: I think it's fundamentally led by manufacturer actions, right? Brand actions, brand actions clearly towards sampling more, penetrating more, as well as premiumizing more. So if you see the growth in let's say liquid detergents or growth for automatic detergents and so on and so forth, they're showing the way in terms of growth.
And obviously those are premium formats and that results in a better growth, et cetera. So its manufacturer action led more than consumer behaviour led. From a personal care lens, it's purely a question of what should I say?
It's just hygiene first, the rest can be seen later. In moments of uncertainty, this definitely happens. Let's take care of hygiene.
Let me pause a little on the others. When I say all this, it's all from India as an average kind of lens. Obviously there is a set of the population which doesn't care for any of these things and keeps consuming.
If we ignore them for a moment, all over India, this is more or less a scenario that you're able to see.
Govindraj Ethiraj: So in your 81,200 homes, what's the rough split between rural, urban regions and so on?
K. Ramakrishnan: We have designed the 85,000 odd homes fundamentally from a point of view of representing India in any which way. To give you a number, we are about 45,000 urban and the rest are rural. But that doesn't mean we take that as it is, right?
We then have to weigh it according to the actual household population. That household population is exactly as reflected in the population statistics. So therefore, this 81,000 represents India in any which way you want to cut it.
Urban, rural, small town, big town, small family, big family, rich, poor, socioeconomic classifications, in every which way it kind of represents India.
Govindraj Ethiraj: Right. And as you look ahead, which is we are in the second month of the current financial year, how are things looking for the next few months and ahead?
K. Ramakrishnan: The growth rate is expected to be sluggish for at least two quarters. In this financial year, which is April, May, June and July, August, September. And towards the third quarter, we are thinking that there will be a sort of a step jump from there.
And why I say that is for the following reasons. There is urban and rural, right? I mean, let me talk, before addressing that, let me talk about the urban and rural scenario as a whole.
I think the broad story with most manufacturers keeps talking about urban tightness and rural areas showing green shoots. That's a, what should I say, talk script that most of the manufacturers have said. That is true if you look at only the large brands, only if you look at the branded purchases, et cetera.
But if you include the local brands, the unbranded stuff and all of these put together, actually speaking, urban areas have grown more or less at par with last year and rural is where we are seeing some amount of sluggishness. But the countryside is showing green shoots, that is absolutely right. I mean, if you look at rural demand, especially FMCGs, there are four factors that kind of drive it.
Factor one is monsoon. By all estimations, they expect the monsoon this year to be good, good to very good. Second is harvest.
So monsoon leading to harvest, non-wastage and things like that, harvest expected to be pretty good in both the crops. So therefore that is another second factor, which is positive. The third factor is support pricing, which is a political factor and likely to continue to be good in that sense.
And the fourth factor is what we call non-farm income, which is, let's say things like Zawahar, Rojgar Yojana, or service economy and things like that, which are all showing positive signs. So in that sense, in a macroeconomic sense, rural is all showing the positive signs and therefore rural has to remain that way. Now, urban tightness that is being spoken about is also a result of a whole lot of factors, right?
I mean, fundamentally, if you divide it as employed versus business, employed, if you look at it, lot of decisions, et cetera, being driven by the world, which is either service economy, Indian companies working for companies abroad, Indian companies selling to companies abroad, et cetera, or global companies being present in India. Now, if I look at the first factor, the Indian companies selling to people abroad, whether it's service or product, it's kind of wrought with uncertainty, right? The uncertainty is on account of tariffs, uncertainty on account of wars, uncertainty on account of dollar value, all of those things.
So that's one set of uncertainty. If you look at global companies being here, their decisions are also based on what their global headquarters demand, which again is being swung by a lot of uncertainty by the same factors. So all of these factors put together, there was a substantial degree of uncertainty, which I think will settle down over the next quarter or so, because we're not, I mean, even the fear of a little bit of a war kind of thing is kind of going away and there will be smaller spurts, et cetera, but I think from an economy tariffs and all of those things, things will settle down.
And so therefore, urban areas will come back to its normal self and rural green shoots that we are seeing will actually come to fruition in the third quarter. Both of these factors make us believe that the growth rate, which is currently, let's say, closer to three and a half, 4% growth that we are seeing can inch up to nearly five as well towards what we call as the fourth quarter of the calendar year or the third quarter of the financial year. That's the outlook that we have.
Govindraj Ethiraj: And in the context of urban, you said that the tightness that was being seen was not really tightness because you said if you were to aggregate both the formal and informal channels, then things were different. Are we measuring it wrongly or differently or why are people coming to that conclusion then?
K. Ramakrishnan: Yeah, so people are coming to that conclusion based on their own sales, right? Like, for example, if I'm replacing edible oil from a branded player with a local unbranded player or loose, then that'll not get counted by me as a branded player. And I see that as a trend.
Govindraj Ethiraj: You think there's down-trading that is driving it?
K. Ramakrishnan: There could be down-trading. There are some smaller brands that are gaining as well. What we measure is agnostic of small, big, agnostic of formal channel, informal channel, et cetera.
Whatever comes into home, we take a measure. So when you look at it from that lens, urban is tight for all the formal players. Urban is tight for all the larger brands.
But the urban basket has not been suffering because they have been replacing it with something or the other.
Govindraj Ethiraj: But you're still saying there's growth. I mean, I think the question is whether there is growth and how much, not whether they are not consuming, right?
K. Ramakrishnan: Yeah, definitely there is growth. 4.5 is what we expect it to be in the third quarter. Currently, it's between three and a half and four.
Right.
Govindraj Ethiraj: And coming back to that urban basket, so it's not clear whether people are down-trading or are they just switching to, let's say, D2C and so on?
K. Ramakrishnan: So D2C cannot swing this market at all. It's still a very, very small part of the global market. And similarly, quick commerce, which everybody keeps on talking about, these are all smaller parts of the overall pie.
So if you look at India as a whole, the ability of these to swing the numbers is not significant. So it's more to do with the fact that at any point of time, an Indian household is a fabulous money-managing household. At any point of time, there is no 100% branded household, there's no 100% unbranded household.
There's no 100% large brand household, 100% small brand. It's always going to be a mix. So that mix will keep changing depending upon what the situation is at that moment of time.
If they feel a sense of tightness, they tend to kind of slow down a bit on the larger brands and go for the smaller brands or for the branded to the unbranded as well. But branded to unbranded can affect only a certain set of categories, primarily in the area of foods, let us say. But that is what the usage of local brands to a larger extent is what is possibly causing companies to believe that there is more urban tightness right now.
In our view, the urban area has also grown, though not as much as last year, it has definitely grown.
Govindraj Ethiraj: Ramki, thank you so much for sharing your thoughts and speaking with me.
K. Ramakrishnan: My pleasure.
