Markets Struggle And Give Up Gains As Weakness Continues

• (00:00) Stories Of The Day
• (01:00) Markets Struggle And Give Up Gains As Weakness Continues, Crude Down Below $87
• (03:03) Headcounts Continue To Fall In India IT Services Majors Amidst Flat Revenue Growth
• (05:36) Nestle Under Fire For Adding Sugar In Rs 2,000 Crore Cerelac Brand
• (09:33) Can Falling iPhone Sales Impact India Production
• (16:49) Elections Kick Off Today, What’s At Stake For India’s Voters

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 Struggle And Give Up Gains

The stock markets put up a brave front in early trade on Thursday but then started giving into selling pressure, as was mostly on the cards thanks to the overhang of high interest rates, funds moving back to bonds and of course the tensions in the middle east.

The BSE Sensex closed 455 points lower at 72,488.99 levels, while NSE Nifty50 closed 152 points lower at 21,995.85 levels.

In the broader markets, Nifty midcap ended 0.49 percent lower at 38,995.70 while smallcap lost 0.28 per cent, to settle at 16,286.35

On the BSE, stocks like Bharti Airtel led the  charts while Nestle India was among the major laggards. More on Nestle in a moment.

Oil prices have fallen to a shade below $87 a barrel, which is a fair bit at least directionally.

Reuters computes that oil prices have recoiled some 6.5% from Friday's 2024 highs to levels last seen before Israel's attack on Iran's Syrian consulate on April 1.

The reason attributed for the fall in oil prices is surging U.S. crude inventories, poor economic numbers from China for March and a U.S. warning about releasing more of its Strategic Petroleum Reserve if necessary.

Results season is now underway. The automotive sector has been largely doing well, as we have been seeing in dispatches and sales numbers in recent quarters and the financials are reflecting that.

India's Bajaj Auto  beat fourth-quarter profit estimates on Thursday, thanks to strong domestic demand for its motorcycles and a recovery in two-wheeler exports.

Standalone net profit climbed 35.1% to Rs 1936 crore million) for the three months to March 31 from a year earlier. 

Total income for Q4 was Rs 11,914.94 crore, up from Rs 9,192.73 crore during the same period last year.

Headcount Falling In IT Services Majors, Amidst Flat Revenue

Bangalore headquartered Infosys reported lower-than-expected fourth-quarter revenue on Thursday as spending slowed in its primary markets in North America.

Revenue growth was up 1.3% on-year at Rs 37,923 crore in the January-March quarter.

For fiscal year 2025, Infosys forecast revenue growth between 1% and 3% in constant currency.

Reuters reported that India's $254 billion IT sector has been struggling in recent quarters as clients have cut spending on non-essential projects amid inflationary pressures.

Significantly, Infosys’ headcount for the financial year 2024 declined by 25,994, for the first time in at least 23 years since 2001.

The total headcount for FY24 stood at 317,240, this is a 7.5 percent decrease from the previous year’s numbers.

On a quarterly basis too, Infosys added 5,423 fewer employees, a drop for the fifth consecutive quarter.

The attrition rate for Q4 on the last twelve-month basis was down to 12.6 percent, from 12.9 percent in the previous quarter.

Infosys has been skipping going for campus hiring for at least the last four quarters, as it looks to monitor utilisation rates and follow a flexi hiring model, MoneyControl reported.

Tata Consultancy Services (TCS) which reported its Q4 earnings last week reported that headcount shrunk by 13,249 employees on a YoY basis in FY24, a first in 19 years since it got listed in 2004. 

While there is some switching happening between IT Services companies that are more publicly scrutinised and the lower profile global capability centres or offshore centres of global multinationals, it does not appear that the numbers are balancing out fully as the reduction in workforce appears more of a push rather than the outcome of a pull or demand from elsewhere.

This has other ramifications on overall consumption and borrowing power in this otherwise vibrant segment of young India and in cities like Bangalore, Hyderabad and Delhi’s National Capital Region.

Large Pension Funds Like Calpers Cutting Back On Equities

Elsewhere, in a fresh sign of how funds could move in coming months or year, stock portfolios at large pension funds in the United States are cashing out after a blockbuster run, the WSJ is reporting.

Corporate pension funds are shifting money into bonds while state and local government funds are swapping stocks for alternative investments. 

America’s largest public pension, the California Public Employees’ Retirement System, a fairly active investor in Indian assets, is planning to move close to $25 billion out of equities and into private equity and private debt.

For pension funds, which target specific investment returns to fund future obligations, this is a welcome change: It means they can take less risk and stay on track toward those goals. 

While stocks have slumped recently, the S&P 500 remains just 4.4% below its record close. The index’s 10% gain through the end of March marked its best first-quarter performance since 2019. Meanwhile, a persistently strong economy has pushed interest rates to multi decade highs. 

Nestle Under Fire For Adding Sugar In Rs 2,000 Crore Cerelac Brand

A news report in The Guardian, UK has said that packaged goods major Nestle adds sugar and honey to its infant milk and cereal range sold in low- and middle-income countries.

The Guardian reported on Wednesday the findings of Public Eye, a Swiss investigative group, which said that Nestle added sugar in the form of sucrose or honey in its Nido and Cerelac range sold in Asia, Africa, and Latin America.

Campaigners from Public Eye, a Swiss investigative organisation, scent samples of the Swiss multinational’s baby-food products sold in Asia, Africa and Latin America to a Belgian laboratory for testing.

So why is this a problem ?

Well, WHO guidelines for the European region say no added sugars or sweetening agents should be permitted in any food for children under three. 

While no guidance has been specifically produced for other regions, researchers say the European document remains equally relevant to other parts of the world, says the Guardian.

Actually The UK recommends that children under four avoid food with added sugars because of risks including weight gain and tooth decay. 

US government guidelines recommend avoiding foods and drinks with added sugars for those younger than two.

Obesity is increasingly a problem in low- and middle-income countries. In Africa, the number of overweight children under five has increased by nearly 23% since 2000, according to the World Health Organization. Globally, more than 1 billion people are living with obesity.

A Nestle India spokesperson responded to the media saying “We believe in the nutritional quality of our products for early childhood and prioritise using high-quality ingredients. Over the past five years, Nestlé India has reduced added sugars by up to 30 per cent, depending on the variant, in our infant cereals portfolio (milk cereal based complementary food)”

“In India, where sales surpassed $250 million in 2022, all Cerelac baby cereals contain added sugar, on average nearly 3 grams per serving,” Public Eye reported. The company sells 15 products under this range in the country.

“There is a double standard here that can’t be justified,” said Nigel Rollins, a scientist at the World Health Organization (WHO), when presented with the findings.

India’s food regulator has promised an investigation into Nestle India.

Apple’s iPhone Shipments Fall

Apple Inc.’s iPhone shipments fell by a worse-than-projected 10% in the quarter ended in March, thanks to slowing sales in China though the overall smartphone industry has done well. 

Apple shipped 50.1 million iPhones in the first three months of the year, according to market tracker IDC, falling shy of the 51.7 million average analyst estimate compiled by Bloomberg. 

The 9.6% year-on-year drop is the steepest for Apple since Covid lockdowns snarled supply chains in 2022, the researchers said.

The drop in iPhone shipments is significant given the overall mobile market registered its best growth in years. 

Smartphone makers shipped 289.4 million handsets in the period, marking a 7.8% rise from the trough of a year ago, when many manufacturers were grappling with a surfeit of unsold devices. 

Samsung Electronics Co. regained the top spot in the March quarter, while budget-focused Transsion increased shipments by 85% and Xiaomi bounced back to close the gap on second-place Apple.

Moreover, analysts like IDC are saying that as the market recovers further in 2024, Android could grow much faster than Apple.”

So what does iPhone falling sales mean for the overall iPhone including the manufacturing ecosystem in India. I reached out to Tarun Pathak, Research Director at Counterpoint Research and began by asking him how he was seeing the fall in iPhone sales and also the overall android to ios ecosystem outlook.

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Elections Start Tomorrow

India will begin voting in general elections in a seven-phase election that starts today.

In today’s first phase of voting in 21 states and territories, as many as 102 constituencies will exercise the franchise, from a total of 543 in the lower house of parliament.

Results are set for June 4.

The Election Commission has to set up more than 1 million polling stations for the nearly two-month duration, with 15 million officials and security personnel fanning out for the task.

I reached out to veteran economic journalist and columnist Shankkar Aiyar, for a quick status check on where voters stood, in his view, on economic and other issues going into elections this time.

I began by asking him what's at stake.