Markets Take A Fresh Knock
The stock markets appear to be betting that the war in West Asia will be short
On Episode 814 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Bhalotia, General Secretary of All India Rice Exporters Association (AIREA) as well as Sudhir Sethi, Founder and Chairman at Chiratae Ventures.
SHOW NOTES
(00:00) Stories of the Day
(00:50) LNG gas supply crunch builds up as Indian importers declare a formal force majeure
(03:31) Markets take a fresh knock but still doing better than expected
(07:43) India’s basmati exports are blocked from going to the West Asia
(14:49) India has major AI ambitions. Where will the funding come from?
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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 feedback@thecore.in.
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Good morning, it's Thursday, the 5th of March and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Our top stories and themes…
The stock markets take a fresh knock, still doing better than expected.
LNG gas supply crunch builds up as Indian importers declare a formal force majeure.
Indian Basmati exports are blocked from going to the one country that consumes large parts of it
And India has major AI ambitions but where will funding come from?
Petronet LNG Has Issued A Force Majeure
The stock markets appear to be betting that the war in West Asia will be short or India will be somewhat insulated, actually make that most countries, something we discussed on Wednesday as well. Both of which are possible but the second order effects are already kicking in, particularly when it comes to gas supply, something we reported on yesterday as well. India's top gas importer Petronet LNG has issued a force majeure notice to its supplier Qatar Energy and India customers, including Gale, as its vessels are unable to reach Ras Laffan load port due to the crisis in West Asia, Reuters quoted the company saying as much in an exchange filing on Wednesday.
The US-Iran conflict has disrupted fuel shipments in the region, as we've been discussing, transit through the Strait of Hormuz between Iran and Oman, which carries about one-fifth of oil consumed globally, as well as large amounts of liquefied natural gas has almost stopped after some vessels were targeted. Qatar Energy has also issued a notice to Petronet indicating a potential event of force majeure due to hostilities prevailing in the region. Gale and Indian Oil Corporation have already reduced gas supplies to industries including fertiliser plants, Reuters reported on Tuesday.
Crisil Intelligence put out a note on Wednesday evening saying that Asian spot LNG prices have flared up from 10 mm BTU, million metric British thermal units, to 24-25 mm BTU. Qatar supplies about 10-11 metric tonnes per annum of LNG to India, which is about 45% of India's imports. If supply tightness persists, price-sensitive industrial consumers may seek alternative fuels, such as liquefied petroleum gas, furnace oil, or naphtha, according to Crisil.
The extent of this feedstock diversification will be a function of the cost-benefit map. Crisil also says elevated LNG prices can also translate to costlier gas supplies to fertiliser plants, which could increase the government's subsidy burden. India has a general target of increasing the share of natural gas in its primary energy mix from 6% to 15% by 2030.
Meanwhile, Russia is ready to divert oil to India to offset West Asia supply disruptions, with about 9.5 million barrels of Russian crude in vessels near Indian waters and able to arrive within weeks, according to Reuters. Meanwhile, the U.S. will provide measures to stabilise oil shipments in the Gulf, Treasury Secretary Scott Besant said on Wednesday, speaking on CNBC's QuarkBox. He said the administration will make a series of announcements on energy transport in the region.
So, what those announcements are and which countries will specifically benefit or whether all countries will benefit, including India, is something that we will have to wait and watch.
Indian Markets
Back home, the stock markets took a fresh battering on Wednesday, though it does appear that the markets seem to believe a resolution is not very far. Now, this is not just in India, but it's globally, particularly on Wall Street.
The Indian benchmarks have lost about 4% now in the last three sessions. On Wednesday, the Nifty 50 hit a six-month closing low and the Sensex hit an 11-month low. The rupee has hit a lifetime low as well, even as oil prices rose and inflation fears kicked in.
So, on Wednesday, the Nifty 50 was down 385 points to 24,480 and the Sensex was down 1,122 points to 79,116. The broader markets were also down. The Nifty mid-cap and small-cap indices were down 2.2% and 2.1% each.
The Nifty Metal Index fell the most, followed by Nifty PSU Bank and the Nifty IT Index gained. Speaking of markets being not so affected both in India and on Wall Street, CNBC quoted Goldman Sachs chairman and CEO David Solomon saying that financial markets have had a surprisingly benign reaction to the Iran war even as the conflict entered its fifth day. The Goldman chief spoke at the Australian Financial Review Business Summit on Tuesday as investors primarily monitored oil prices after Iran said the state of Hormuz had been shut and any vessel passing through would be targeted.
I'm actually surprised, Solomon said at the event, I think the market reaction has been more benign given the magnitude of this than you might think, CNBC reported. And on Wednesday, stocks rebounded, that's on Wall Street, after a report that Iran made indirect contact with the US to negotiate an end to the war in West Asia, boosting hopes that the conflict could be short-lived. Now, when this outreach happened and to what extent it could actually go through is obviously not clear, but the markets are obviously looking for any sign of positivity.
The dollar halted a two-day rally, Bloomberg reported. S&P futures were up and that specific report referred to operatives from Iran's Ministry of Intelligence using back channels to contact the Central Intelligence Agency or CIA a day after US-Israeli attacks began, the New York Times reported Wednesday. Brent crude also retreated from an intraday high to trade below $83 a barrel.
So that's where it is right now, $83 a barrel. Earlier in the day, Asia saw considerable action with a record sell-off in South Korean equities. One reason for that is Asian economies like China, South Korea, and Japan are much more dependent on oil flows from West Asia.
According to a Bloomberg report, Wall Street's strategist to mom-and-pop traders who had just started to pile into the market, the plunge came as a surprise. The artificial intelligence boom had helped push the KOSPI up nearly 50% this year at its peak. Analysts told Bloomberg that there had been a lot of buying on credit, especially those heavyweight stocks, with investors putting down only 30 to 40% in margin deposit, and those holdings are seeing forced liquidation.
And if there's another drop on Thursday, nobody will catch a falling knife that analysts predicted. The chief of South Korea's Financial Services Commission asked relevant institutions on Tuesday to actively use contingency plans if needed. Gold prices were up about 2% on Wednesday, rebounding from their lowest in more than a week, reached in the previous session, according to a Reuters report.
And spot gold was holding at about $5,198 per ounce, or about $5,200 per ounce, after falling more than 4% on Tuesday. The rupee was not so lucky. It fell about 67 paise to close at an all-time low of 92 rupees 16 paise against the dollar on Wednesday.
The dollar index is strong, has crossed the 98 levels on the risk-off situation prevailing all around the globe amidst the US-Iran crisis, which of course puts further pressure on the rupee. This finance segment is presented by India Finance and Innovation Forum 2026, being held from the 16th to the 18th of March at the World Trade Centre Cuff Parade in the city, and you can find the link to register in the show notes. About 400,000 metric tonnes of Indian basmati rice are backed up at ports or in transit, and export deals have dried up as freight rates have more than doubled since the US and Israel attacked Iran at the weekend trade officials told Reuters the day before.
Disruptions for Indian Rice Exporters
India is the world's largest exporter of aromatic premium basmati rice, with buyers in West Asia including Saudi Arabia, Iran, and the United Arab Emirates, which account for more than half the shipments. Iran is a very large buyer. I reached out to Ajay Bhalotia, General Secretary at the All India Rice Exporters Association and also Director of Fortune Rice, and I began by asking him to describe what had happened in the last four days.
INTERVIEW TRANSCRIPT
Ajay Bhalotia: Definitely now already four days passed and basmati is a major share in the war zone countries. So now impact is started to the industry and means no new demand is there and definitely all the old orders are also struck or stopped by the buyers because there is no way how the produce will go and how the cargo will go. So it is starting the giving the impacting to the Indian exporters and manufacturers.
Now all depends how long this war will go.
Govindraj Ethiraj: Okay, now in terms of destinations, which are the major destinations currently and which are the ones most affected?
Ajay Bhalotia: The current most effective is the Iran only because Iran has a huge share in our export market from the India. Around if you say around 10 to 15 percent directly go to Iran and then 10 percent to the other routes. So it's almost 25 percent of our export to the Iran.
The most effective way is Iran, but definitely rest of the countries UAE, Kuwait, Oman is also a good share of the Indian basmati rice and it is also getting the impact due to this war.
Govindraj Ethiraj: And overall West Asia or Middle East, what would be the percentage in terms of exports from India versus other countries or regions?
Ajay Bhalotia: If you take the whole Middle East, then it is 80 percent export to the Middle East. It is 4.8 million to the Middle East and rest 1.2 million to the rest of the world.
Govindraj Ethiraj: Right. And all of this only goes by ship?
Ajay Bhalotia: Yeah, 100 percent ship. No air cargo because rice is a heavy commodity. Everything goes to the ship only.
Govindraj Ethiraj: And between basmati and non-basmati, what would be the split? I understand basmati is the major part, but what would be the split?
Ajay Bhalotia: In Middle East, the non-basmati share is very less because these are indirectly, you can say, they are rich countries, so they prefer to eat the expensive rice and non-basmati is the cheaper rice. But you can say in our total export, around 20 percent share is the Middle East of the non-basmati rice.
Govindraj Ethiraj: And till now, how has been the overall rice export market compared to the previous year?
Ajay Bhalotia: It is going very well and it was going very well over the years. And in the last one month, there is a hike of 10 to 15 percent in Indian market because of a huge demand of Iran, especially Iran. And everything is going very fine, very good.
And the farmer also get the good prices of the crop as year to year if we compare this year prices. But now from last four or five days, it happened, it's not going smooth.
Govindraj Ethiraj: And normally, what is the waiting period for consignments at ports before they leave on ships and how long can they last in normal circumstances?
Ajay Bhalotia: In the Port Authority of India, the shipping line gives around 10 to 15 days free time of the storage at the port. Then you stuff the cargo in containers, so its average is 10 to 15 days. But definitely the cargo already stuffed before the war, it all stuck at the port.
And in transit, whatever, it also reached to the port. Now the issue is the ground and shipping line charges already accelerated and exporters are facing the huge concern in that.
Govindraj Ethiraj: So my question also is for the rice that's lying at the port, I'm assuming it's JNPT one of the main ports?
Ajay Bhalotia: No, it's the Mundra and Khandla is the main port. JPT has a less share of the Basmati rice, very less share. Main port is the Mundra and Khandla.
Govindraj Ethiraj: Okay. So how long can that rice be lying there without getting spoiled or do you have enough time on that?
Ajay Bhalotia: Spoiling is not the issue at all because rice has a long shelf life. Only the charges, because as you know, the Port Authority of India charges are very high, as well as the shipping line charges are very high. And even shipping line has put the additional war charges on the containers and storage charges because they are saying our all the vessels are stuck, our all the plants are stuck, so you have always exporter or importer has to bear these charges.
So this charges is a major concern for the Indian exporter, not the life of these cargo.
Govindraj Ethiraj: Got it. And on the Indian port side, exporters don't have any force measure clause or anything that can hold the leverage?
Ajay Bhalotia: It is there and we already requested the MOC for giving the waiver of these charges or long storage period, long time at the ports. And already a feed has returned to the MOC or already met the additions at the MOC and the GFT because they are the two persons who are responsible for their concern of the exports. They already assured us that they are talking to the authorities, the port authorities, even to the shipping lines and finding out the other routes, how can the ship reach to the destinations from different routes.
And if any additional permission is required from the importer country, the Indian government is also finding out that ways.
Govindraj Ethiraj: Right. So the Ministry of Commerce has said that in a statement that they will help exporters in every possible way, particularly in this period. So are you getting that help?
And is there something else that you're looking for?
Ajay Bhalotia: No, definitely they assured us, we met already two times to them, but definitely it is a process because it is directly not in the control of Ministry of Commerce. They have to go to the shipping ministry, they will go to the finance ministry. So they are talking to them and we are satisfied with their replies, whatever they have informed us and committed us, but it is all depends when the results will come.
But we think that if worst of, then nothing is required from them. But if it will continue, then we think that government of India will do his best efforts.
Govindraj Ethiraj: Right. And all the ships that are currently either not going or stuck are basically going through the Persian Gulf. Is that right?
I mean, and that's where the problem is.
Ajay Bhalotia: Yes, straight off from us. Yes.
Govindraj Ethiraj: Okay, last question. How is the domestic market been for high or premium rice like Basmati rice? And is it a possibility that some of this rice could come back to the domestic market?
Ajay Bhalotia: Definitely Mr. Govind when there because it is expensive rice and huge production is there without export, we can't eat all the rice which we are producing in the Basmati in our country. When the prices are slashed for the export market, it's always beneficial for the Indian consumer. If the price is reduced, so definitely Indian consumer now getting the cheaper their rice because of more demand of export.
Govindraj Ethiraj: Right. Ajay ji, thank you so much for joining me.
Ajay Bhalotia: Thank you.
Funding for Indian AI Ambitions
The recent India AI Impact Summit in Delhi saw several policy-linked discussions around the application and impact of AI on areas like healthcare, education, and governance. A parallel convention also saw several homegrown AI products being displayed. While India is not in the main LLM race or large-language model race like ChatGPT in Anthropic, there are other applications, including in the real world, in both hardware and software that many companies, including startups, are working on.
I reached out to Sudhir Sethi, Founder and Chairman of Chiratai Ventures India Advisors, which terms itself India's largest homegrown venture capital firm with around $1.3 billion of assets under management. Sethi also moderated a panel on this theme of funding for deep tech enterprises at the AI Summit in New Delhi. And I began by asking him how he was seeing the overall flows of capital into these areas.
INTERVIEW TRANSCRIPT
Sudhir Sethi: It's very interesting as a precursor to our discussion, deep technology and AI, of course, has come now, but deep technology, if you see, in the US has grown in the last 20 years in an environment of capital abundance. And if on a scale of 100, let's say capital abundance in the US was 100, China also, deep technology has grown in an environment of capital abundance. But if you say 100 in the US, maybe China was 10 or 20.
In the last 10 years where we have been investing in deep technology, we have seen that arena being one of capital scarcity. So this is the very important background to note. In the last 10 years, we ourselves have invested in about 60 deep tech companies, put in about $300 million.
These were medical devices, these were generative AI companies, perfect in medical devices. In the healthcare sector, we had some. In PIXIS in the AI space, in UNIFOR, again, in the generative AI space, MECO in the robotics space, AI robotics, Aether in the space of AI robotic prosthetics, and the list goes on.
And in every case, we found that the funding was a paucity. And to that extent, some have succeeded, some have obviously not succeeded. The interventions which are taking place to address this issue of capital paucity and specifically the RDF fund, which is coming up, which is a huge state intervention, which is so required.
And to that extent, that's an $11 billion approximate fund, 50% to be contributed by investors. And that would mean in the next 10, 15 years, if everything happens, it's a $22 billion state and private sector intervention. That is humongous.
So I think we are now at a stage where, as the disbursements start, based on merit, of course, to fund managers and to direct companies through organisations like TDB and BIRAC, we are looking at capital adequacy plus, maybe not abundance, but hopefully abundance as we move forward. And you will find that this will change things. Now with this, I will refer to what we are seeing right now.
So if you look at some of our older companies and some of the industry older companies will certainly be benefited. But of course, everybody knows Sarvam, everybody knows Naya, Cure in the vertical side. A lot of startups have come up in the various stacks of AI and some at the infra level, some at the application level.
But I think over 75% are in the application layer. I think what I saw at the conference was very interesting and outside the conference. So we saw an AI robotic company, Industrial Robotics, looking at cleaning sewage pipes.
And so many examples of not just horizontal, because a large part is horizontal in the application layer, some vertical, some models which have been developed, which are being trained on various verticals as such, e.g. the MECO model is trained on children using robotic interface to communicate with the model. So I believe now various models will emerge for India usage, for enterprise to use it, because that's a very large space to increase efficiencies of enterprise in India. Of course, there'll be new applications in health, there'll be new applications in the space of insurance.
I mean, insurance is a very good example, right? AI takes structured data and does the benefit of that structured data in terms of obviously analytics, dashboards, and then inference, and then decision making, and then action. You have to cover all these layers.
But a lot of the money which has gone into funding insurance is on the underwriting and distribution side. But the biggest cost is claims. So how do you apply AI to claims?
Very interesting. And I hope I see some, because that's not structured data coming in, right? That's personalised data.
How do you address that problem in insurance? So I think a lot of founders are going to come in with that capital variability in very unique areas, but it will be a mix of horizontal and vertical. AI robotics, AI health, the whole area of AI industrial robotics, and so on and so forth.
Govindraj Ethiraj: Right. So the conference itself was obviously large, and it had representation from all over the world, including the big tech giants. In order to achieve some of the things that you see as opportunities, what else do we need as an ecosystem?
Apart from the announcements and the intent that has been done, what do we need to see?
Sudhir Sethi: Well, I think I was reading a report and which said the market in AI alone is by 2030 is about $126 billion. And currently, the existing companies have raised about $2.5 billion in AI alone. And if you mix up this with AI plus robotics, AI space, AI industrial, AI defence, 126 billion is a very, very small number.
I think with new companies coming in, one major factor, which is going to be a driving force is the training of models and the applications within India. At the conceptual framework level, we have a billion people who need healthcare. We have hundreds of millions of farmers who need farmer productivity and drainage loss not to be there for storage.
We have so many other sectors where technology is required to deliver services to masses of people right now. So I think AI can be used there. Deep technology can be used there.
And then the question comes is who pays for it after some time? And the payment part is very, very important right now. Who pays for it?
I think it's happening already in defence, where defence is now taking local manufacture and local technologies, local AI, whether it is in drones and et cetera, et cetera, in a very large manner. I think we have to seriously think of how to do in enterprise. How do you do PSU?
How do you do enterprise? How do you take consumer companies in large enterprise to say, I think this is a good model and I'm going to adopt it as such. Vertical AI health is a very good example, right?
Will hospitals use it in India to deliver mass volume services in the country and pay for it? India traditionally has not paid for technology services in a very large manner as such. I think that has to change very, very fast.
That's I think is the biggest element. I think policies are running nice. Capital hopefully will flow now.
We have to still dependence on India capital is increasing. It's a small number, but in the PVC market, there will be a lot of fund managers who will start new funds on focused on deep technology, more capital from international pools and domestic pools into technology with longer fund cycles. That's going to be a very interesting model because you don't build technology in six, seven years and eight years.
So I think those policy changes will have to be reviewed to see how you have a 15 year fund, how you have evergreen funds. And then if extensions happen, you don't force fit an end of a fund.
Govindraj Ethiraj: Right. Now, again, as from an investor's lens, India has two kinds of opportunities. You've talked about the domestic opportunity, which is serving domestic consumers and particularly in areas like health.
What's the international opportunity? And again, between the two, what looks more interesting or do both look the same?
Sudhir Sethi: Yeah, I just want to mention one thing, which I think needs in policy intervention. I think grant mechanisms at scale are very important for technology companies to grow because risk capital equity comes in when grant has actually pulled in a lot of development of the product, brought it to a certain level where monetization can happen. These are products which take a long time, very complex products.
So I think grant mechanisms at scale for investment in technology firms are far and beyond. And at a small scale, we need to see how policy intervention can take place for existing capital to come here. Right.
That could be a very big game changer overall. Now come to international applications. I think international applications, anything which works in India can go to any part of the world.
Let's be very clear. Right. You start with UPI.
It's working in India can be taken outside. We have a company called Meco. Meco's 90% of sales of the model and the robotic interface is in international markets in more than 30 countries.
As such, you see AI robotics, which is the arm, upper limb prosthetics. They're being sold in US and Europe and other parts of the world very successfully and in a very, very competent manner. So I think international operations are a necessary and important model for scaling.
Domestic is the challenge because purchasing power here and intent is something which we should encourage.
Govindraj Ethiraj: Sudhir, thank you so much for joining me.
Sudhir Sethi: Thank you very much, Govind. All the best.
