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Santa Stock Market Rally Faces Resistance

The stock markets are doing alright if you were to ignore what has been termed the Santa Rally of late October through December 2023, when in India the Sensex went from around 63,000 to cross 72,000 a few days ago

By Govindraj Ethiraj
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Santa Rally
On today’s episode, financial journalist Govindraj Ethiraj talks to Manish Raj Singhania, President at FADA (Federation of Automobile Dealers Associations of India) as well as pilot and aviation safety advocate Captain Amit Singh.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (00:50) Is the Santa Stock Market Rally of 2023 facing resistance?
  • (05:48) India’s oil consumption is rising as global oil prices stay low.
  • (08:06) How Indian malt whiskeys beat the Scots at their own game?
  • (17:51) New flying rules could lower stress levels for pilots, is it sufficient?
  • (28:50) Starbucks says will It will have 1,000 stores in India


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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Santa Claus is leaving town, literally for sure. As far as the markets go, well we will have to wait and watch.

The stock markets are doing alright actually, if you were to ignore what has been termed the Santa Rally of late October through December 2023, when in India the Sensex went from around 63,000 to cross 72,000 a few days ago.

But if you were to use the start of the year 2024 as the starting point when the Sensex was over 72,000, then things obviously are looking less rosy.

Back in the US where most of the negative triggers are flowing from, apart from a strong labour market which means economic indicators are stronger than perceived, there is also a new and large supply of Government and corporate debt in the US which means capital staying put.

The US benchmark 10-year yield is now holding above 4%, after jumping 17 basis points last week thanks to  strong labour data numbers which in turn is causing traders to bet that the Fed will not rush to reduce interest rates as originally expected and forecast. 

Back home, the BSE Sensex, which surged 680 points intraday, swung back down and  ended 31 points higher at 71,386 levels. The Nifty50, too, ended at 21,545 levels, up barely 32 points after hitting a high of 21,724 during the day.

A fund manager I spoke to said the see-saw is also caused by the strong supply of domestic funds which is balancing out selling foreign portfolio investors, unlike in the past where FPIs could typically define the rise and fall trends.

Speaking of domestic funds, net assets under management (AUM) climbed above 50 trillion rupees for the first time, data from the Association of Mutual Funds in India (AMFI) showed on Monday.

While the mutual fund industry took almost 50 years to build the first 10 trillion rupees of AUM, the last 10 trillion rupees was amassed in just over a year.

Meanwhile, Goldman Sachs has raised its 2024-end target for the benchmark Nifty50 index to 23,500, a roughly 10 percent upside from the current levels on the back of an earnings upgrade and valuation re-rating.

Goldman’s earlier target was 21,800, the Business Standard reported.

Our revised target incorporates 2 per cent higher earnings per share (EPS) and 6 per cent higher target price-to-earnings P/E (19.3x),” Goldman Sachs said in a note.

The brokerage says the global macro environment has turned more favourable compared to two months ago with the expectations of stronger US growth and optimism around rate cuts by the US Federal Reserve.

Elsewhere, the macro data is looking a touch weaker

A Reuters poll of economists is projecting that India's retail inflation likely edged up in December on higher food prices.

Inflation, measured by the annual change in the consumer price index rose to 5.87% in December from 5.55% in November, according to the median view from the Jan. 5-9 Reuters poll of 56 economists.

Food prices, which account for about half of the inflation basket, rose in November and remained elevated last month, largely led by vegetable prices and household staples.

Speaking of inflation, a new report from Crisil tracks Google searches for price queries and says inflation anxiety has been easing over 2023, but still higher than 2018-2021, according to Google Trends data.

Onions and potatoes have specifically shown a super  spike in Google search interest every few years. Not so much potatoes because prices have not moved so much, a fact further linked to storage conditions of the lack of them for all these vegetables. 

Crisil says the Google Trends index based on searches for ‘inflation’ is strongly correlated with inflation expectations of households based on the Reserve Bank of India’s (RBI) survey, and hence, a good proxy for inflation anxiety in the economy.

Oil Stays Low After Large Drop

Oil held the largest drop in about a month on signs of a weaker physical market, including an unexpected pricing cut by OPEC leader Saudi Arabia, Bloomberg reported.

Benchmark Brent is now trading around $76 a barrel after tumbling on Monday with West Texas Intermediate under $71. Riyadh reduced its prices more than had been expected, with prices of other Middle Eastern crudes also declining.

Speculators have begun 2024 by taking bearish positions now on oil. Crude is being held down by rising supplies from outside OPEC countries including US shale gas and concerns that demand will slow this year. 

Oil prices are staying low despite the Israel-Hamas war which has triggered related attacks on shipping in the Red Sea to Suez Canal route by Houthi rebels.

Back home, India's fuel consumption rose to a seven-month high in December to about 20 million metric tons, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed, Reuters reported.

Total consumption, a proxy for oil demand, in December rose by 6.2% from around 19 million tons in November. It was up around 2.6% compared with the same period a year earlier.

"Due to the festive season, demand has been growing at a rapid rate in recent months. Demand will continue to increase but the growth could be slower, as 2023 has been a strong year," said a LSEG analyst.

Sales of diesel rose but gasoline fell. 

On the other hand, vehicle sales continue to do well, rising, as we reported via FADA data yesterday, some 21% annually.

WHich means more fuel will get consumed though vehicles are becoming more fuel efficient.

Indian Malts Overtake Foreign

Sales of homegrown single malt whiskeys are overtaking the Scottish and other brands, the kind Indians once made a beeline for in Duty Free.

Some 40% of the fairly high priced Indian malts like Amrut, Paul John or the recently popular Indri are exported but demand is growing back home as well. 

Estimates from industry body Confederation of Indian Alcoholic Beverage Companies (CIABC) show that Indian single malts have cornered a share of around 53% of total sales in 2023.

Indian single malt brands grew over 23%, provisional estates say, while imported malts grew at 11%.

Interestingly, global alcohol giants like Diageo and Pernod Ricard who typically source their single malts from Scotland are launching local brands. Diageo had introduced the Godawan in 2022, while Pernod recently launched its first Indian single malt Longitude 77, the TImes of India reported.

The interesting thing is of course that consumers both in India and abroad are willing to overlook the aura of Scotland produced whiskey and experiment with Indian malts, only to find it to their satisfaction. 

I reached out to Vinod Giri, Director General of the CIAB. Giri is an industry veteran himself having worked in Seagram and SABMiller in senior positions. I began by asking him to give us a quick crash course on malts and the reasons why Indian malts were scoring over the Scottish ones.

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Speaking of alcohol, it turns out that  Health-conscious younger people are drinking less than millennials or baby boomers when they were the same age, Bloomberg is reporting. 

Thanks to which non alcoholic spirits which make up only a sliver of the $650 billion spirits market at around $1 billion now are booming. They’re poised to grow around 30% annually in the coming years, versus 6% for conventional spirits, Bloomberg quoted market research company Euromonitor.

Whether big or small, these companies are all chasing after younger customers. Among 18- to 26-year-olds in the US and Japan, more than half claimed not to have consumed alcohol in the previous six months, according to data provider IWSR. 

In a separate Gallup Poll survey, 62% of American adults under age 35 said they drink, down from 72% a decade ago.

Several liquor companies are obviously jumping into this category as well, which by the way is seeing higher prices at this point. 

The other and interesting countervailing force working here is weight-loss drugs Ozempic and Wegovy which appear to ease the pull of addictive substances including alcohol

New Flight Norms

Not the wisest thing to speak of alcohol and then jump to aviation and flying but some good news that came in 

Pilot safety has been, as we pointed out  yesterday, in the spotlight in India after an unusually high number of deaths of pilots across Indian airlines apparently because of fatigue-triggered cardiac conditions and a general increase in reported fatigue.

The Directorate General of Civil Aviation on Monday introduced new flight duty regulations under which weekly rest hours for pilots have been increased from 36 hours per week to 48 hours.

It also reduced the maximum flight time for pilots to fly at night in a day to eight hours and cut down maximum landings by a pilot in a day to two.

The new FDTL norms have been shared with airlines and they will be required to comply with the revised norms by June 1, the DGCA said.

The question of course is is this sufficient.

I reached out to Captain Mohan Ranganathan, aviation safety consultant and former instructor pilot on Boeing 737s specialising in wet runway operations training.

I began by asking him if the new changes address the issue of pilot fatigue at hand and also how these norms stack up against international or best practices..

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Meanwhile, air safety officials probing last week’s fuselage blowout on a Boeing Co. 737 aircraft on Alaska Air are now focussing on  four bolts they’ve been unable to locate and said they may widen their investigation beyond the Max 9 variant after multiple airlines found loose parts, Bloomberg reported.

The bolts were meant to secure the door panel that suddenly broke loose on Jan. 5, when Alaska Airlines Flight 1282 was climbing toward cruising altitude with 171 passengers aboard. 

Tightened properly, they prevent the panel from sliding upward past the 12 stopper tabs that bind it to the aircraft’s fuselage.

Meanwhile, the Directorate General of Civil Aviation (DGCA) on Tuesday said a missing washer was found on one of the aircraft during an inspection of 39 of the under-fire Boeing 737 MAX fleet in India, 

However, it was rectified as per Boeing's recommendation prior to the release of this aircraft. "Inspection on the aircraft will be completed prior to release for service," it said.

Boeing had recommended a one-time inspection of all Boeing 737 MAX aeroplanes before January 10, 2024. DGCA last week asked airlines to inspect the emergency exits on the Boeing 737-8MAXes in their fleet, the ET said.

Starbucks To Go To 1000 Stores

Coffee giant Starbucks Corp has said it will double its stores in India in four years, opening the equivalent of one new shop front every three days, as the country’s growing middle class fuels a boom in coffee consumption, Bloomberg reported

Starbucks wants to operate 1,000 stores in India by 2028, and the focus will be in so-called tier-2 and tier-3 cities.

Starbucks came to India in 2012 through a 50 per cent joint venture with the Tatas and has 390 stores across 54 cities.

 It will also expand drive-thrus, airports and 24-hour cafes, and expects its Indian workforce to double to 8,600.

Despite the popularity of tea, coffee drinking is growing, including the experience of it, in well appointed and cool cafes.

“Over the past 11 years, the India market has grown to become one of Starbucks' fastest-growing markets,” Chief Executive Officer Laxman Narasimhan, who is visiting India this week, said in the statement. 

The target for 1,000 stores would make India one of the company’s major overseas markets, though dwarfed by the more than 6,500 stores in mainland China.