Markets Take A Breather As Bank Stocks See Selling
The markets took a breather yesterday after opening in the positive and then searching for direction through the day
On Episode 603 of The Core Report, financial journalist Govindraj Ethiraj talks to G Chokkalingam, Founder at Equinomics Research & Advisory Pvt Ltd. We also feature an excerpt from our extended interview with Algorand’s Anil Kakani and Nikhil Varma in our ongoing “Build On Blockchain” Series.
SHOW NOTES
(00:00) Stories of the Day
(00:50) Markets take a breather as bank stocks see selling
(03:12) Is it the macro story or micro story that is driving Indian stockmarkets right now
(11:00) How Wall Street banks are doubling down on Indian derivatives
(13:00) Rare earth crisis escalates for Indian companies, Maruti to slash production of some models
(15:29) Build On Blockchain
(21:08) Apple’s Liquid Glass fails to enthuse the market
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 11th of June, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, we're right now in transit.
The top themes and stories
The stock markets take a breather as bank stocks see some selling.
Is it a macro or micro story that's driving Indian stock markets right now?
How Wall Street banks are doubling down on Indian derivatives?
The rare earth crisis escalates for Indian companies, and Maruti to slash production of its electric model.
And Apple's liquid glass fails to enthuse the market.
Markets Pause
The markets took a breather yesterday after opening in the positive and then searching for direction through the day. There is much going on beyond the market, which obviously affects the market, and we'll come to that. At close, the Sensex was down about 53 points to 82,391, and the Nifty was up one point to 25,104.
It does happen that one index closes in the positive and the other in the negative, though not very often. Banking and financial stocks saw some selling as did real estate stocks, mostly triggered by that interest rate cut that we heard or other saw last week. While IT stocks did well, hopes continued that there would be a trade deal between the United States and China, which would mean some form of calm returning to world markets.
Now, that is yet to happen, though, even though, or even as, all markets ranging from stocks and commodities, including gold and oil, are standing by. In the broader markets, the Nifty Mid-Cap 100 was slightly in the red, while the Nifty Small Cap 100 was in the positive. So again, very similar to the BSE and Nifty.
Elsewhere, monthly systematic investment plans, a reflection of how retail investors are viewing this market at any point, their contribution to mutual funds was up to a record 26,688 crore rupees in the month of May, with the number of contributing accounts rising to an all-time high of about 85 million. The number of new SIPs registered in May stood at about 59,000, according to the Association of Mutual Funds of India. The number of new SIPs registered in May 2025 stood at about 5.9 million, according to the Association of Mutual Funds of India. On the other hand, flows to equity mutual funds as a whole dropped about 21% in May 2025 to 19,000 crore rupees. In March 2025, flows to equity mutual funds stood at about 25,000 crores, but had dropped to a 12-month low of 24,269 crore rupees in April 2025, a month which saw considerable geopolitical shifts. A report in the Business Standard Quotes fund managers referring to the rise in hybrid categories, including arbitrage and multi-asset funds, saying that investors are using these as strategic tools to stay invested while managing short-term volatility.
According to that fund manager, arbitrage funds in particular are being seen as a safe space to temporarily park funds ahead of further deployment. Overall, investors appear to be making balanced and thoughtful allocation decisions across asset classes aligned with their risk appetite and investment horizon. So, while the markets have been on a somewhat bullish trend in recent days, the question is, what are the primary cues that are driving them and what are they responding to?
Is it macro cues, domestic and global, or is it micro performance, which is really how companies are doing and whether the markets are reflecting that? I reached out to G. Chokhalingam, founder of Economics Research, and I began by asking him how he was seeing this, macro or micro?
INTERVIEW TRANSCRIPT
G Chokkalingam: It is a mix of both, macro and micro, because the data point also proves that from September 2024, when the overall market cap hit $5 trillion or 485 lakh crore rupees, from there, the market crashed by 100 lakh crore rupees or 100 trillion rupees in February 2025. And from there, as of today, the overall market cap has recovered 70% of the losses. Out of this 100 trillion rupee loss, the market has already recovered 70 trillion rupees.
Now, if you decompose this gain, it is contributed by both overall large cap as well as broader market. For example, the Sensex has recovered from February low by about 12.6%, but overall market cap has recovered by more than 18%. So it is both large caps as well as a broader market where you have 4,000 stocks in the small and mid-cap space.
But predominantly, the contribution is more from the small and mid-cap, broader market. Now, it is contributed by both macro and micro. This is the end result.
The causes were the economic factors. That again, both domestic and external, because initially the market got scared about trade war, but then the market realised that we don't have to worry too much about the trade war because our goods exports oddly account for 10% of the total GDP. And there again, US contribution is not the predominant in the overall goods export basket.
And secondly, the service sector was not impacted by the trade war. Third, a lot of bilateral agreements are taking place. So, you know, the market later realised that India is in a better position to handle this trade war because of the domestic demand, which is very strong here.
And also continuously, you know, third year in a row, you are going to have a record level of food production, low inflation, banking asset quality improved, credit growth still strong, double digit. So, so many macro factors which contributed the whole market to lift, but predominantly, the contribution came more from small and mid-cap. So therefore, the micro stories played a larger role than the overall economic factors or overall market.
So there are many individual stories which played out very strongly that contributed, you know, starting from public sector banks to so many themes in the small and mid-cap space which contributed to this robustness. So therefore, it is both macro and micro stories which accounted for this.
Govindraj Ethiraj: So Chokha, the question then is that at a broader level, people do feel that earnings growth has still not picked up, particularly when it comes to Nifty 50. And they also see that as a sign of the economy having picked up, but not to the extent that they would like. And which is why valuations are also being questioned at this point.
So how do you read this?
G Chokkalingam: To a large extent, it is true. You know, the large cap segment, say you take a Nifty or Sensex, they are identified with, you know, seven, eight broad sectors, like telecom, automobile, banking, cement, you know, real estate. So what's happening, the majority of these sectors have single digit growth syndrome.
So including IT services, dollar exports are growing in the poor single digit at the rate of two to 4%. So it is true. And that is why the recovery also in Sensex Nifty is muted as compared to the broader overall market cap.
That would continue for the next one or two quarters. Now, below this, the top 100 stocks, you have over 4,000 small and mid-cap stocks. There, you have a real, you know, growth story.
You have deep value stories. Now you have attractive investment holding companies. You have possibilities of takeover acquisitions.
Like the last 10 years, you saw a lot of acquisition in the mid-sized IT stocks. You had a lot of acquisition in the cement stocks, small cement stocks. So these 4,000 stocks offer four varieties of opportunities for stock pickers in terms of growth, deep value, investment holding, acquisition.
And that is not the case with the larger sectors where you still have the majority of them suffering from single digit growth syndrome. So even in this 4,000 stocks, small and mid-cap, you know, the market, I believe, this time it has become quite smart. You see new themes like EV theme, microfinance theme.
They will not recover. Many of them are still down more than even 50%. So the market is now cautiously rewarding the broader market, the small and mid-cap based on the theme.
And at the same time, it has already punished the themes which failed to deliver. So that is the same explanation which holds good for the larger sector also. So this cautious approach of rewarding either growth or values, I think that would continue for at least for another two, three quarters.
That is why I maintain my stand that the small cap would outperform the large caps at least for next two to three quarters. Unless you see a remarkable turnaround in Nifty Sensex earnings in terms of conviction that they will grow 15 to 20%. Unless that conviction comes, this relative outperformance by small and mid-cap would continue.
Govindraj Ethiraj: Right, so in a sense, there are more companies that are doing well and growing their earnings even at this time, despite the feeling that the economy overall is not growing, let's say beyond 6.5%. Yes, and there are two important facts which are worth highlighting here.
G Chokkalingam: In the last 12 months, 4.2 crore new investors have entered the market. In the last one year, every week, a minimum of five to six lakh investors, new investors are entering the markets. And they are chasing the small and mid-cap and those who chose the wrong stock were punished.
And therefore, now more and more new investors are also forced to look at values and growth. And second insight, why the broader market is doing well is, as I mentioned, in the large cap, you have broad sectors being identified with the companies in the Nifty and Sensex. But in the broader market, you have got very, very heterogeneous services and product companies.
There are many such businesses, individual businesses, unique businesses, still growing in strong double-digit. So therefore, in terms of share number, as compared to 30 Sensex or 50 Nifty stocks, there are plenty of stocks which even from a growth perspective, you can identify. One good example is public sector banks.
Phenomenal achievement. In the last 10 years, the net NP has come down from 8% to an average 0.5, 0.6%. Gross NP has come down even from 16% to 3%. And most of them are in the mid-cap or small caps.
So just one example. And they also assure you growth. So this kind of heterogeneous services and product businesses with the growth opportunity, value opportunity are available and they are in plenty.
So I think for next two, three quarters, I think what we are seeing now relative performance of this broader market would continue.
Govindraj Ethiraj: Right, Chokka, thank you so much for joining me.
G Chokkalingam: Thank you.
Wall Street Banks Double Down
Wall Street banks are now doubling down on Indian markets, which is also the world's fifth largest. And this time they're focussing on derivatives according to Bloomberg. In general, a series of Wall Street banks have been upgrading their stance on India in specific and emerging markets as a whole in the last month or so.
UBS Group AG, for example, abandoned its long standing bearish stance on equities in late April, describing it as a defensive amidst trade uncertainty. Meanwhile, firms like Society General, HSBC Holdings and Nomura are also predicting gains and according to that Bloomberg report, which added that JP Morgan Chase in a note last week said India was a relative safe haven amidst a trade war 2.0. Bank of America has offered low cost hedges to help investors more confidently stick to their cord long positions and added that India is regaining attention from traders seeking to shelter their holdings from the US President Donald Trump's tariffs.
The Reserve Bank's surprise 50 basis point interest cut last week also helped overall sentiment and increased hope of a revival in corporate earnings. Monsoon rains have faltered right now after an early arrival, but are largely projected to be above normal and could thus help rein in inflation and of course drive growth. On Friday, the Nifty 50 was less than 5% away from its peak in September 2024.
Bloomberg said that derivative strategists at JP Morgan were already positive before that 50 basis point rate cut and that India is well positioned cyclically and bets that Nifty 50 volatility will fall further. The firm also highlighted bullish recommendations and along with Bank of America, some potential cheap hedges for investors who want to protect their stock holdings.
A Rare Earth Crisis Escalates
India's largest car maker Maruti Suzuki has reportedly cut near term production targets for its maiden electric vehicle e-Vitara by two thirds because of rare earth shortages according to a document seen by Reuters. The rare earth slowdown was seen as directed at US companies importing from China, but the nature of customs restrictions is evidently affecting Indian importers and obviously car makers like Maruti. Last week, we did speak about why rare earths are critical for electric vehicles, particularly magnets, which go into motors.
Maruti earlier had appeared to say that it would not be affected by these supply problems, but now has apparently indicated that it will make only 8,200 e-Vitaras between April and September versus an original goal of 26,500 according to that document seen by Reuters. Maruti does plan to ramp up in the second half, which is to about 67,000 eVs for the year, which means production in subsequent months would increase and obviously there is expectation that this problem would get resolved. Maruti said that there are supply constraints in rare earth materials that are vital in making magnets and other components across a range of high-tech industries.
Some companies in the United States, Europe, and Japan are seeing supplies easing as they secure a licence from Beijing. India is still waiting for China's approval amidst those fears of production stops. The e-Vitara was launched in January and represents Maruti's EV push and is also in the context, or rather has to be seen in the context of India taking EVs to about 30% of all car sales in five years from about 2.5% last year. Maruti is also up against Tata Motors and Mahindra and Mahindra who now lead the EV market and Maruti's share of India's passenger vehicle market is currently at about 41% from its peak of more than half, that's 51% five years ago. Meanwhile, China's decision to impose restrictions on the export of rare earth elements and related magnets is expected to impact India's auto and white goods sector in the short term. According to India's commerce minister who was speaking in Switzerland yesterday, adding that the government is actively exploring alternatives including diplomatic efforts in the development of new supply chains.
According to Minister Piyush Goyal, the Indian embassy is already in discussions with Chinese authorities on the matter and the commerce ministry is engaged as well. China controls over 90% of global processing capacity and these magnets are essential components across sectors like automobiles, household appliances, and renewable energy.
Build On Blockchain
Welcome back to Build on Blockchain where we dive into how decentralised technologies are redefining access, ownership, and opportunity from the ground up. This week, we are shifting our focus to another cornerstone of financial security, that's wealth and wealth management. For many families, the challenge isn't just creating wealth, it's preserving it, planning its succession, and ensuring fair access to opportunities for future generations.
But what happens when your assets are illiquid like real estate, art, and collections, or even business equity? Can technology help you plan for that future, distribute ownership fairly, and do it all without middlemen? We'll explore how tokenization is reshaping succession planning, how fractional ownership is opening the doors to previously out-of-reach asset classes, and how smart contracts are making revenue distribution seamless and transparent.
Joining me to continue that conversation are Nikhil Verma, Technical Lead for India at Algorand, and Anil Kakani, Vice President and India Country Head. I began by asking Nikhil to speak about how these days, people are increasingly looking to invest in new types of assets and innovative financial vehicles, and how he saw blockchain enabling this shift.
INTERVIEW TRANSCRIPT
Nikhil Varma: So wealth management has an amazing use case with blockchain because one of the biggest problems for wealth management is succession planning. And succession planning is you have a movable property and it has been inherited by three children. What do you do now?
Who gets what? If I'm able to tokenise it, fractionalise it, I could make it now a much liquid movable currency. It can transfer.
Suppose I have an artwork here, which is worth millions of dollars. Which kid of mine is going to have it? I only have two.
Which one of them is the one who's... Now, what if I tokenise and fractionalise it, put it in a smart contract? Whatever is the revenue that is generated from the rental of that artwork goes to both my kids on a real-time basis.
In fact, I bring in a trust company. You know, we're talking about trust, but a company which actually manages the rental of that thing and they also get 10% of it and everything happens in an immutable manner forever. So this is one of the aspects that blockchain can do where there is no confusion.
Access fractionalisation is a very interesting use case for wealth management, wealth mobility.
Govindraj Ethiraj: So in the case of the painting, suppose I were fortunate enough to have the painting, who would I go to to say that, listen, I've got this painting worth X amount of dollars and I want to create a token, which in turn I want to distribute to my children or family members.
Nikhil Varma: That's an interesting thing. So somebody has to be the innovator here. So that's the beauty of blockchain.
Another beauty is the entry barrier for innovators, for people to build applications is almost zero. The technology is very state-of-the-art. So like, you know, I'll give you an example of the Algorand blockchain.
A person knowing Python can deploy, can write applications in Algorand.
Anil Kakani: But to answer your question though, right, someone builds a solution on our platform, on our protocol, right? Nikhil can use that to distribute, you know, fractionalise and distribute any revenues using a smart contract to his kids. So that's between him and his kids who will have, you know, a wallet, they're somehow represented in that app, right?
So companies, banks, traditional ones, new ones, wealth management, you know, there's many different players, many opportunities for innovation who see an opportunity, but it doesn't have to just be paintings, right? It could be real estate. It could be any- Any liquid asset.
Yeah, yeah.
Govindraj Ethiraj: Okay, so sort of building on that illiquid assets, one of the things that happens, as you said, is succession and therefore conflict. So how do the current system of courts and regulation address that?
Nikhil Varma: Well, the only way I know succession planning works in India is liquidity, right? So you actually have to sell off and then you have to share, right? Because one says, oh, my property is worth more or less than yours, and then there's a conflict.
So they have to liquidate everything, which was ancestral, to be able to, and then split it whatever way it was set up. But now you don't have to. You can still make it work, and that trust that is kind of technology-mediated or technology-based kind of helps you not to kind of lose your ancestral pieces.
I mean, this is, I'm just giving you a simple example. There could be much more complex scenarios to this, right? There could be a scenario where you could have a company which is managing this.
The company takes a certain part, but then now you have full trust in the company that they're not going to take things over from you because everything is embedded in a smart contract. You could have, you know, you manage it, self-manage. You could have technology manage it for you.
Like, you know, just can set up a technology-based Airbnb. Whatever is the revenue coming in, there's a smart contract which splits the money. Let's look at mutual funds.
Govindraj Ethiraj: I mean, that's still higher on the wealth spectrum, though maybe not on the extreme high end. And we've seen a huge amount of participation in India in the mutual fund space. Some 100 million investors have come in just in the last four or five years.
And there are high transaction costs.
Nikhil Varma: And you see blockchain playing a role there. Of course. I mean, there is a role for blockchain in any place where there is an overhead aspect, right?
Not that we want to remove, blockchain removes the overhead. The word should be that non-value addition gets out, and the overheads of, say, tracking, traceability, reporting goes down. And that kind of makes the system now very, much more easily manageable with a low operating cost.
Anil Kakani: You know, we think of it as disintermediation, right? All those middle individuals or parties in that transaction who aren't necessarily adding value, they're making the transaction happen, but those can be addressed. You know, you can find more efficient ways to manage that process.
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That segment was part of our special coverage built on blockchain brought to you by Algorand. Catch that full interview soon on the course YouTube channel, Spotify, or wherever you get your podcasts.
Liquid Glass
Apple's annual developer conference or WWDC on Monday was much tracked and talked about like always, but did not see any major announcements that at least set the markets on fire. And more so particularly of the kind fans would love to see or look forward to seeing. Except for one thing.
There was an important software update that later this year will change the way all of Apple's major devices from iPhones and Mac laptops to Vision Pro virtual reality headsets will look according to a CNBC report. It's a new design language called Liquid Glass that will run across all of Apple's operating systems. For Apple, it's the first significant redesign of its iPhone operating system since 2013 when the company announced iOS 7.
Apple says the lock screen will look like it's made out of glass, buttons will turn into little glass spills and will fluidly slide over glass rails. And there are new animations as well, including when answering a phone call. The core report also recognises that many of you are listening to this podcast on an iPhone.
Wall Street was disappointed. It sent the stock down about 1.2%. CNBC said, adding that investors want Apple to make big changes to its AI strategy, pushing it to match the frontier model's capabilities of rivals like Google and open AI. And UBS analyst quoted by CNBC says, many of the AI features announced were more incremental in our view and already available through competitor applications.
Last year, Apple announced Apple Intelligence in response to chat GPT, complete with a demo of a more personal city that could intelligently pass through mails and messages to figure out the best time to make a restaurant reservation. Apple delayed the feature in March, then pulled out ads that showed it and then provided no update on the timing of this on Monday. That's the day before.
Apple's software chief said that this work needed more time to meet their high quality bar and said that it would happen in the coming year. Beta testing for Liquid Glass will start in a few months and users will be able to spot Liquid Glass as soon as they upgrade their phones to the new iOS, according to the company.
