Markets Tank On Middle East Tension Spikes

• (00:00) Stories Of The Day
• (01:00) Markets Tank On Middle East Tension Spikes, Poised To Recover
• (02:44) India Will Outperform Japan & China As Most Compelling 12 Month Investment Case, Says Bloomberg Fund Manager Survey
• (04:47) Above Normal Rainfall For First Time In 8 Years, Says Met Department’s Monsoon Projections
• (07:05) BJP And Congress Put Out Manifestos, Looking At Them Through An Economic Lens

NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

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Markets Lose Ground, Poised To Recover

It was a tough day in the markets as they lost ground on Monday thanks to increased tensions in the middle east with Israel and Iran faced off against each other and world powers scrambling to contain an Israeli retaliation to Iran’s firing 200 missiles and drones into Israel which in turn was a response to Israel bombing a Iranian embassy in Syria.

The BSE Sensex fell 845 points, or 1.14 per cent, to end at 73,400 levels, while the Nifty50 closed at 22,273, down 247 points or 1.1 per cent.

27 of the 30 Sensex stocks and 44 of the 50 Nifty stocks posted losses on Monday. 

The BSE MidCap and SmallCap indices dropped 1.5 per cent each. 

The rupee closed at its lowest against the US dollar, down 3 paise to close at 83.45 against the U.S. Dollar. 

Meanwhile, well known investor Jim Rogers told Business Standard that

He owns oil and gold, not because of war, but because I see shortages developing of crude oil across the world. 

Gold prices, on the other hand, have been depressed since quite some time now. It has, however, started moving up again. Geopolitical worries will lead to higher gold prices. So, I am not selling gold. If I had to buy anything today, I would buy silver. Silver prices have dropped a lot from their all-time high. That said, I hold silver as well.

India To Outperform China and Japan, BBG Survey

India’s ability to convert economic expansion into corporate profits makes it a better prospect for investors than Japan or China, according to the latest Bloomberg Markets Live Pulse survey.

Even with China’s attractively low stock valuations, and Japan’s progress in improving corporate governance, almost half of 390 MLIV Pulse survey respondents selected India as the best investment among the three Asian giants. 

“There are many reasons to prefer expensive India equities over cheap China ones such as better transmission of GDP growth into earnings growth,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore. 

A “better track record of delivering consistent earnings growth and supportive geopolitical environment” further bolster the case for Indian shares, he said.

Incidentally, Indian stocks now trade at around 23 times next year’s expected earnings, exceeding even the US, and outpacing the 17 for Japan and about nine for China, according to data compiled by Bloomberg based on MSCI Inc.’s indexes.

More than half of the survey respondents said they expected China’s equity market to underperform India and Japan’s over the next 12 months.

Indian equities attracted $25 billion in net inflows for the year through March, compared with just $5.3 billion for China, according to data compiled by Bloomberg. 

Indian shares now make up 18% of the MSCI Emerging Markets Index. China’s 25% weighting is well down from its high of more than 40% a few years ago.

Infrastructure in India was highlighted as a particular bright spot in the survey by 41% of the respondents. 

The government has more than tripled its infrastructure allocation from five years ago to more than 11 trillion rupees ($132 billion) for the 2025 fiscal year. Modi is projected to invest 143 trillion rupees to modernise critical infrastructure in the six years through 2030.

Good Monsoons Are Here

The Indian Meteorological Department has said in its first long range forecast for the year that the south west monsoon which runs from June to September will be above normal this year.

This is the first time in 8 years, the IMD has forecasted above normal rainfall which is 104 to 110 percent of long period average or LPA.

Interestingly in 2022, India did see above normal rainfall  while last year it was normal at 94%.

BOB research said expectations of normal monsoon bodes well for the agriculture sector and will also keep a check on food prices. 

In terms of spatial distribution, regions such as North West, Eastern and North Eastern regions are expected to witness below normal rainfall while other regions continue to record above normal rainfall across the country.

The IMD’s forecast of above normal rainfall comes on the heels of other forecasts of extreme heatwave conditions ongoing

in the country. 

BOB Research also pointed out that water reservoir level has also been lower at 33% of their total capacity compared with 39% reservoir levels noted last year (as of 12.4.2024). 

On weather conditions, IMD stated they expect El Nino conditions moderating over the equatorial pacific region with certain agencies forecasting possible fading of these conditions and turning to neutral ENSO (El Nino Southern Oscillation) conditions. 

In the latter half of the South west monsoon (Aug-Sep), there is a possibility of the formation of La Nina conditions.

These conditions result in cooling of the sea surface temperature and they contribute to higher rainfall. 

Citing data from 1951 to 2023, the IMD chief said it shows India experienced above-normal monsoon rainfall on 9 occasions when La Nina followed the El Nino event. 

Manifestos: Do they Matter?

Elections start rolling later this week and the leading parties, Bharatiya Janata Party or BJP and Congress have put out their manifestos which outline their vision and commitment for the next five years.

The Congress manifesto is called Nyay Patra and the BJP is called Sankalp Patra with the Modi Ki Guarantee slogan.

Both manifestos have a fair bit in common including a focus on women, farmers and support for farmers, education, infrastructure, health, national security and youth in not necessarily in that order.

The approach of each party to this is a little different.

The BJP has said it guarantees India will become the third-largest economic power, commits to low inflation and economic growth and increasing job opportunities and supporting tax payers.

The Congress has said it will double GDP in the next 10 years, enact laws to protect gig and unorganised workers and support free trade and rule based international commerce.

Very broadly, many of the other promises that involve expenditures will not come through if the economy does not do well, so let's stay on that point, going by the track record of the BJP as we know it and what it might change if so.

To discuss this, I reached out to Ashok K Bhattacharya, Editorial Director and Columnist, Business Standard.

I began by asking him first, if manifestos mattered and whether parties could be held to account on them.

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Tesla Slashes Workforce Globally, In Search For Showrooms

Since Tesla, even news of a search for showroom space in Mumbai and Delhi, usually a matter involving local real estate brokers, is big news.

Because obviously it means it will start selling its cars which in itself was not such a major step since it will now be able to import them at sharply reduced or 15%duty rates which is what it wanted in the first place and the policy has been tailored for it. 

Current import duties could go upto 100% but exceptions are made for companies promising to set up domestic manufacturing in EV. 

Meanwhile, the headline news is that Tesla will reduce global headcount by more than 10%, Bloomberg reported, quoting CEO Elon Musk saying there was a duplication of roles and job functions in certain areas.

Some 14,000 jobs are set to go.

Bloomberg also reported Tesla  reported disastrous vehicle deliveries early this month, missing expectations by a wide margin and posting its first quarterly decline in four years. 

Several analysts are bracing for the EV maker’s sales to potentially shrink for the year, citing slow output of its newest model — the Cybertruck — and a lull in new products until the company starts producing a next-generation vehicle late next year.