Markets Snap A Four Day Losing Streak
The rupee is on a weak footing versus the dollar
On Episode 743 of The Core Report, financial journalist Govindraj Ethiraj talks to Capt. Amit Singh a Pilot and an Aviation Safety Strategist.
SHOW NOTES
(00:00) Stories Of The Day
(00:48) Will The Reserve Bank Cut Interest Rates Today And Markets Snap A Four Day Losing Streak.
(04:59) What Is The Central Bank’s View On The Rupee ?
(12:06) Indigo Says Normalcy Only By February 10, 2026.
(26:16) Apple Is Shipping Record Number Of Iphones Thanks To Iphone 17
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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 Friday the 5th of December and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, our top stories and themes…
Will The Reserve Bank Cut Interest Rates Today? The Factors That Are At Play.
The Stock Markets Snap A Four Day Losing Streak.
What Is The Central Bank View On The Rupee?
Indigo Says Normalcy Only By The 10th Of February 2026 And That's Almost Eight Weeks From Now.
Apple Is Shipping A Record Number Of Iphones Thanks To The Successful iPhone 17.
Will We See A Cut?
So the question of course is will there be an interest rate cut in today's credit policy and what could that do to the markets if the Reserve Bank were to cut interest rates.
Now the straight answer to the first question should be unlikely if not a no because why would you cut interest rates when GDP growth is at a solid 8.2% for the latest quarter that's up to September. But what if the Reserve Bank of India concludes like some other candidate economists have among other things that actual growth is a little lower than that. Investment bank HSBC said for example in a note earlier this week that the 8.2% number benefited from both a cyclical boost as well as a statistical anomaly.
On the cyclical front the bank says that strong rains, monetary easing, fiscal spending and goods and services tax rate cuts all came together nicely. But on the statistical front a low base and deflator issues may have exaggerated the numbers. Now HSBC says that they estimate the two deflator issues affecting manufacturing and services sectors respectively may have understated the deflator by 1.2 percentage point and overstated real GDP growth.
So according to them their estimate of actual growth in the quarter is closer to 7% and that says the bank is still a strong performance but lower than the released 8.2%. On the other hand even if there was an interest rate cut what could it do to the markets and how much do banks really transmit those interest rate cuts. I was talking to a banker last night and they said that the reserve bank puts a lot of pressure on them to transmit those rates so that borrowers like you and me can benefit. But does that really happen and to what extent I wonder.
Back home the stock market snapped a 4-day losing streak on Thursday. Benchmark indices the Sensex and the Nifty were in the green thanks to IT stocks even as the rupee hit that record low of Rs. 90.56 though it recovered later.
The Sensex closed at Rs. 85,256 up 158 points and the Nifty 50 was up 47 points to Rs. 26,033.
In the broader markets the Nifty mid cap 100 and the Nifty small cap 100 were down slightly. Meanwhile another bullish call this time from Bank of America which expects the Nifty to deliver 11.4% returns by calendar year 26 as earnings cuts ease, growth prospects improve and foreign portfolio investors return according to a report in the Economic Times. Now the Bank of America does not foresee valuations expanding meaningfully in the year ahead but it does believe that the Nifty can continue to command a modest premium to its historical averages settling near the 19.6 times earnings.
The optimism for them stems from the current earnings cycle. The note said that in fact basis the current earnings cycle the Bank of America says that Nifty deserves to trade at valuations slightly above its long-term averages at 19.6 times. It also points out that the 50 stock index has put up a fight delivering positive returns for the past three months though year-to-date returns are below the 10% mark.
Now to return to the potential interest rate cut by the Reserve Bank of India today HSBC is arguing that in the inflation growth debate they believe low inflation is a more convincing dynamic than high growth as the latter has deflated issues and further a low nominal GDP growth strengthens their case. That's HSBC's case and more significantly as we've been discussing on the core report as well external finances are weakening which is putting pressure on the rupee but a gradually weakening rupee is the best shock absorber for high tariffs particularly the tariff walls for exporters into the United States and rate decision says HSBC should focus on the growth inflation trade-off instead of the currency. Meanwhile foreign portfolio investors have sold something like 933 million dollars worth of shares so far this week that's more than twice the 425 million dollars in outflows in all of November according to Reuters.
The Rupee Strategy
The rupee is on a weak footing versus the dollar whether it will remain so is an economic and perhaps even philosophical question should the Reserve Bank keep selling dollars to lift the or let it float a little as it has evidently done in the last few weeks because a depreciating rupee is the best available buffer as we've just discussed against the tariff shock that Indian exporters are facing and particularly to the United States. Now the Reserve Bank will tolerate a weaker rupee as the country's external sector confronts multiple headwinds including a wider trade gap and stalling of dollar inflows according to Reuters which is reporting basis conversations with people in the central bank. Now the Reserve Bank of India which supported the rupee through aggressive interventions via dollar sales until last month has now allowed the rupee to fall about 1.3 percent in the last seven trading sessions to a record low of 90 rupees 42 paise.
The rupee is also down about five and a half percent this year and is Asia's worst performing currency. The sources also told Reuters that by signalling tolerance for a weaker rupee the central bank is indicating it will intervene mostly to curb sharp volatility or on any signs of a speculative build-up but not defend any specific level on the rupee. Now this is obviously something that's also in a way unstated government policy given the fact that the country's chief economic advisor on Wednesday said he was not getting sleepless nights over the rupee's fall and if there was a time to depreciate for the rupee that is this was it.
To come back to the sources of the central bank according to them it doesn't make sense to spend reserves when fundamentally everything is against the currency and they also said that as and when fundamentals and real dollar demand dictates the central bank does let the rupee move more than it normally would and of course there is the fear that speculators who are already believed to be flexing their muscles will move in more actively. At that point the central bank could step in and stamp out those as needed according to those sources who spoke to Reuters and finally on Thursday the rupee did end above the 90 per dollar level after hitting a record low as dollar sales from multiple foreign banks likely on account of inflows helped the currency snap a sixth session losing streak. The rupee fell to 90 rupees 42 paise early in the session before reversing course to close at 89 rupees 97 paise according to Reuters.
A Bet On Gold
Stock prices can be tough to call for the year ahead though people do that because the variables are many. How about gold? Well it seems to largely depend on one person that's US president Donald Trump.
Gold prices could rise between 15 to 30 percent in calendar year 2026 from current levels according to a note by the world gold council that now that is over the 53 percent that gold prices have risen already this year as investors have bulked up on the yellow metal against the backdrop of US tariffs and geopolitical concerns. As part of that we've also seen central banks including India stepping up their purchase of gold and the WGC report says that the combination of falling yields elevated geopolitical stress and a pronounced flight to safety could create or rather would create exceptionally strong tailwinds for gold supporting a sharp move higher. Under this scenario it says just to come back to that figure gold could appreciate between 15 to 30 percent next year.
Moreover investment demand particularly via gold exchange traded funds would remain a key driver offsetting weaknesses in other areas of the market like technology. Some of these arguments apply to silver as well where both institutional and retail buying is up sharply and prices as we can see and have been discussing are at record highs. On the other hand if Trumponomics does well for whatever reason and some of that fear recedes from the markets then gold prices could fall says the world gold council and that could lead to a fall of anywhere between five percent to twenty percent in the calendar year 2026.
For that to happen says the WGC Donald Trump's policies need to succeed resulting in stronger than expected growth linked to fiscal induced support in the United States and then under those conditions the inflation takes hold pushing activity higher and lifting global growth towards a firmer trajectory and I'm sure people would like some of that and if they like that would they be willing to give up some of those gains on the dollar. The Trump family of course has also been focused on crypto which has been battered recently and let's take a moment on that there's an interesting Bloomberg report which says that for as much as broader crypto markets have sunk in the last two months about 25 percent in the case of bellwether bitcoin projects that are tied to the Trump family are down much more. World liberty financial co-founded by President Trump and his sons has seen its token tumble 51 percent from its peak in early September more than both bitcoin and an index of smaller digital tokens.
Alt 5 sigma a company promoted by the Trump sons has plunged about 75 percent even as it deals with a growing number of legal problems and then there are those meme coins says Bloomberg named after the president and his wife which have fallen about 90 percent and 99 respectively from their record highs back in January. Now bitcoin of course fluctuates wildly and that's one reason we don't talk about it much on the core report and of course the more important fact that it's not a recognised trade in Indian securities markets back to gold global gold ETFs have seen about 77 billion dollars of inflows in 2025 according to WGC data adding over 700 tonnes to their holdings.
Nuclear Power
India's nuclear power generation capacity is set to rise from the current 8780 megawatts to 9480 by the end of the current financial year and go up to about 21,880 or close to 22,000 megawatts by 2031 which is roughly five years as projects under implementation get commissioned according to the government which said so in a written reply in parliament.
There are several reactors which are currently under construction including in Rajasthan and Haryana and there are more in the pipeline that's about 10 reactors of 700 megawatts each in Kaiga in Karnataka, Chutka in Madhya Pradesh, Gorakhpur in Haryana and in Rajasthan as well. Oil prices rose on Thursday on investor expectations that the federal reserve will cut interest rates while the stalled Ukraine peace talks tempered expectations of a deal restoring Russian oil flows which was obviously quite high or rather the expectations were quite high just last week. Crude rose about 81 cents to $63.48 on Thursday afternoon according to Reuters which reported on the latest oil prices.
Indigo Imbroglio
Indigo on Thursday told the aviation regulator directorate general of civil aviation that its operations will be fully restored by February 10th according to Reuters. Now that's eight weeks away and pretty much everyone who travels or knows someone who travels or flies has faced a Indigo delay if not cancellation situation in the last few days and I attended a conference in Cochin where people could not turn up including some who actually sat in an aircraft in Pune and then had to go back because it did not take off. So Indigo which is struggling with a growing pilot shortage and the implementation of the flight duty time limitation rules has sought relief from the DGCA regarding some of the provisions of the rules that limit pilot duty after it cancelled hundreds of flights this week.
It said that the disruptions have arisen primarily from misjudgment and planning gaps in implementing the new rules and also said more cancellations are expected in coming days. Indigo is the largest airline in the country with about 2,300 daily flights and has cancelled over 300 flights in the last two days and delayed hundreds more. The DGCA also put out a statement on Wednesday saying that almost 60% of the cancellations of Indigo flights were due to flight duty time limitation issues.
So which brings us to the question what brought things to this pass? What are flight duty limitation issues? We've talked about them in the past but it's worth revisiting them and more importantly could Indigo have foreseen this and finally will other airlines or could other airlines also be facing similar situations which we perhaps don't know about. So I reached out to Captain Amit Singh, pilot and aviation safety strategist who's flown on both Boeing 777 and Airbus A320 and he specialises in flight operations, safety management systems and regulatory compliance. I began by asking him whether this was a situation that Indigo could have foreseen.
INTERVIEW TRANSCRIPT
Capt. Amit Singh: I don't see any planning gaps here because the airline plans the summer schedules and the winter schedules. That's what they've been doing year on year and they have a whole commercial department. They take the schedules to the regulator.
The regulator approves them based on some data that they provide that is published by the regulator. They proudly boast that they're increasing the number of passengers that they are carrying, number of destinations that they are serving, increased number of aircrafts. They are number one.
So from planning point of view, there is no issue. What the basic issue is, what they have cited is the flight duty time limitations. So it is not that something happened on 1st of December or 2nd of December that they woke up that, oh, we are short by so many hundred pilots.
So that is not a planning issue because they have the best softwares. They keep a track of everything. The airlines matches the line ready pilots available because you have a number of pilots.
Some may be under training, some may be undergoing medical, some may be on leave. So what are the line ready pilots available to an airline? So that is the number they have and then they match it with the number of flights.
So when you're planning the next month's roster for the pilots, you put down pilots against each flight. That is when you will come to know that so many flights are open without any pilots. Planning must have started way back.
And how the plan is that you have an empty chart with all the flights. First, you planned a training that so many pilots are on training, but that is mandatory. Other safety training or courses and leave, then whatever is left that you plot against each flight.
Govindraj Ethiraj: Right. So I was talking to an Indigo pilot this morning, actually, and he was saying that, from his perspective, not from a sort of management perspective, that one is the number of winter flights have increased and the number of pilots have not in the last six months or so. And you also have the FTTL.
I'm just trying to understand the variables at work here. So the FTTL was a known factor. The winter schedule was a known factor.
And pilots, let's say, may or may not have been able to ramp up to the extent needed. So why would any airline not be, let's say, gearing up for an FTTL change, given everything else that is in its control?
Capt. Amit Singh: See, the schedule, of course, they're aware. And when you submit schedule for approval to the DGCA and you increase the number of flights by six percent, 900, 856 additional flights per week. So you have to see how many pilots I have.
So either there's a disconnect, those departments are working in silos, that the commercial department goes ahead and says, we want more flights, we want more revenues. And they do not inform the flight operations. When the schedule is approved, they give it to the flight operations.
That happens in airlines, mostly public sector airlines. The commercial is going ahead with expansion. They don't have pilots.
The operational department is not taken into confidence when making the schedules. But this Indigo, the way they run, they are very highly coordinated airlines and very well run. This was a strategic move to save costs, again, save costs in terms of number of pilots.
So every department has some projection on cost saving year by year. So if, for example, the flight ops will say, this is my flight ops budget and I'll manage within this budget. So once they have committed, they'll try to keep the costs under control.
Keep the costs under control means maximise the utilisation of pilots. And if required, get some regulations changed or waivers done so that with the existing human resources, we can continue to fly even with the extended or enhanced schedule. So this is a department's basically overreach, they're overstretching.
But at the level of accountable manager, the CEO, they have to understand that you cannot go beyond a certain limit and you have to have fallbacks. If your calculation is based on certain presumptions that this particular rule will get implemented, then what if it doesn't? Is there a fallback?
So there was no plan B.
Govindraj Ethiraj: So you're saying the airline was betting on the rule not being implemented or being given an extension?
Capt. Amit Singh: They were looking at implementing the fatigue risk management system for which in September, DEC issued a draft circular to the airlines. Fatigue risk management system is a highly specialised data-driven system which no airlines in India can manage. But they wanted to implement it only because they saw the advantage of stretching the number of hours a pilot can fly.
That advantage they saw and they wanted to implement it. The regulator is not prepared. After the Mangalore accident, the committee recommended that FRMS should be implemented.
Then there was a Zaidi committee after that. The Zaidi committee examined the whole FETL issue and they recommended that FRMS must be implemented because at that stage, ICAO did not come up with FRMS but they had it in the draft. So the Zaidi committee said that whenever ICAO starts implementing FRMS, we should be ready.
So DGCA should start training their officers on FRMS. But unless you are trained on FRMS, how will you approve a system? Right now, who's trained in DGCA on FRMS? So that is the issue.
So the operator basically went to the regulator that this is the way we can stretch the number of hours and we need this. So that case must have been accepted by DGCA. DGCA issued a circular.
The ICAO and DGCA's own regulation says that if you want to implement FRMS, you have to make regulations for it. So a regulation cannot be implemented by a circular. A circular can give you guidance on how to implement the policy.
But it cannot be the regulation, a circular cannot issue a circular that this regulation is implemented and this is how you will implement. It has to be a civil evasion requirement, which means that CAR has to be drafted, put out to the public for comments for 30 days. Whatever comments are received that you deliberate upon, accept or reject, then you formalise that this is the new regulation.
But DGCA wanted to do it through a circular and there was opposition to that from various pilot bodies and beginning of the month, these pilot associations met the DGCA and they said it has to be a collaborative effort. You cannot do it unilaterally. So I think DGCA saw that there is a pushback.
So they did not approve the FRMS, which was the plan A. There was no plan B for Indigo. So that failed and that basically there was a collapse in the whole system.
That was the premise based so much. That is what I feel. Well, suddenly nothing happened.
The fatigue management FTTL was introduced in January of 2024. There was a pushback from the airlines operators. In March, it was kept under abeyance.
Then the associations of pilots, they went to the high court and the high court gave directions for it to be implemented. DGCA said we will implement it in a phased manner. And when the first phase was implemented, which was the toughest one, wherein rest period was to be enhanced, so nothing happened.
No flights got cancelled, nothing happened. The second one was implemented, nothing happened. But suddenly on second, the whole system collapsed.
A lot of people may have lost a lot of money, a lot of precious time and businesses may have been affected. People who are going for medical treatment may be affected. So who's responsible for this?
The government has given them extension that okay, we feel it is a FTTL issue and we extend it to February or later. But who will pay for all the losses? There has to be an enquiry to it.
A committee has to enquire. So what I feel is that four people in the ministry of DGCA have decided this. Okay, give them extension.
But then there has to be a fine along with it. The passengers have to be compensated. So there is no deterrence.
Tomorrow Air India will do the same thing.
Govindraj Ethiraj: So that was my next question actually. So how are the other airlines faring on this count? I mean, they've all had to meet this same FTTL deadline, isn't it?
Capt. Amit Singh: When the phase one, phase two were implemented, nothing happened in Indigo. So why suddenly on 2nd December things collapsed? So there has to be the same thing.
There has to be an enquiry. A committee has to sit down and investigate on what happened on that day. Air India as such, they do not have such a shortage.
They in fact have on some fleets excess pilots. That's why they were thinking of giving a flexible roster to the pilots. So they're not so tight on the pilot situation.
It is not that better managed or something. Indigo was supposed to be better managed, but they have deliberately led to the situation wherein the public has been put to inconvenience and they have got away spot free.
Govindraj Ethiraj: Right. Let's see. I mean, as you said, there will be an enquiry and it's going to reach some logical conclusion.
Last question, Captain. So I mean, you're an active pilot yourself. Just for people who are trying to understand the whole issue of flight duty time limits, which is what this seems to be centred around.
Where does India stand vis-a-vis other parts of the world, including the parts that you fly in actively?
Capt. Amit Singh: See, if you look at the flight duty time limitation, it is a human being and the human body which is involved. International Civil Aviation Organisation, when they have drafted the rules, they say that it has to be scientific because human physiology is a science. So the regulations have to be scientific.
Indian regulation is nowhere close to science. It is ad hoc. The way things have perpetuated and what you have seen in the last few months or few years, everything is done ad hoc.
So that let's increase it by two hours. Let's decrease it by so many hours. Let's give them an extension on this extension on this fleet.
So that is all ad hoc. There's no science behind it. If you look at science, science from the early days, 1996, when NASA said after an extensive research that the maximum flight duty period should be 10 hours, not more.
Beyond 10 hours, then the probability of an accident increases by 1.7 times and so on. So there's a whole science and calculation behind it. So even EASA goes up to 13 hours.
So Europeans, what they did, they have a committee of doctors, 13 doctors. They have a committee of specialists in everything, in cardiology, psychology, neurology. All these doctors sat down and then they prepared a flight duty time limitation.
So they also said 10 hours is the max duty time. You should not go beyond 10 hours. And EASA finally went up to 13 hours because EASA said that you have to balance between commercial and safety.
So if you are giving 13 hours, we'll make sure that the rest is accordingly given. But the committee put it down on paper that even though EASA has gone to 13 hours, it is beyond violating the scientific norms. So in India, if you ask them, what is the logic of 13 hours, 16 hours?
So there is no science behind it. In India, weekly, we can have a flight duty period of 60 hours. World Health Organisation and International Labour Organisation have released a statement that globally there have been 745,000 deaths in 2019 because of cardiac issues and stroke, working more than 55 hours a week.
But pilots can fly 60 hours. So that is the kind of working conditions under which Indian pilots are working. If you see the graph and I've published it, the number of temporary unfit and permanent unfit pilots are increasing year on year.
So there has to be a system, a safety management system should look inwards that so many pilots are becoming unavailable for flights. Is it because of our schedules? Are we pushing them?
Are we giving them adequate rest or not? But nobody has done a study on that. So it is just kind of mechanical that you have to be available, you're not available, then we hire another person.
So it is that kind of situation. The culture, the safety culture in India is such that the pilots are crying out for help and the system says, no, since you are legal, you fly. But the legality, there's no science for it.
Even the courts will not entertain that. Somewhere there has to be sense or logic. Logic is only in science.
Govindraj Ethiraj: Right. Thank you so much for joining me today.
Capt. Amit Singh: Thank you very much.
Apple's Record.
Apple will hit a record level of iPhone shipments this year, driven by its latest models and a resurgence in its key market of China, according to research from IDC and in a report in CNBC. Apple will ship about 247 million iPhones in 2025, over 6% compared to last year, and that's more than the 236 million it sold in 2021 when iPhone 13 was released.
The reason for all of this is obviously iPhone 17 has done well, including in India, which is a base for its manufacturing. And Apple's predicted surge is thanks to the phenomenal success of its latest iPhone 17 series, a senior research director at IDC told CNBC, adding that in China, a massive demand for iPhone 17 has significantly accelerated Apple's performance. IDC's report follows on from counterpoint research last week, which forecast Apple to ship more smartphones than Samsung in 2025 for the first time in 14 years.
