Sensex Hits Record 86,000
It was a big day for the stock markets with the Sensex and Nifty finally hitting record highs
On Episode 737 of The Core Report, financial journalist Govindraj Ethiraj talks to Devina Mehra, Chairperson and Managing Director at First Global, in an excerpt from our upcoming Weekend Edition.
SHOW NOTES
(00:00) Stories of the Day
(01:19) Sensex Hits Record 86,000 as Nifty Scales Peak in Narrow Rally
(03:28) Rupee Risk Persists After RBI Sells $30 Billion to Stem Slide
(04:54) Nifty’s Record Calm Defies Rupee’s Run as Asia’s Worst Currency
(18:58) Oil Slides to $63 on Ukraine Ceasefire Hopes, Aiding India Margins. The IEW Segment
(20:12) Mahindra Challenges Tata’s EV Dominance With New $22,000 SUV
(21:39) KKR Sees $7 Trillion AI Boom as ‘Industrial Revolution,’ Not Bubble
(25:00) Feedback
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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 [email protected].
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Good morning. It's Friday, the 28th of November, and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital, our top stories and themes. And by the way, we are still smogged out.
The Sensex and Nifty hit record highs, even as they rise in a narrow rally.
The Reserve Bank of India sells $30 billion to stem a slide in the rupee.
The Nifty's record calm defies the rupee's run as Asia's worst currency.
Oil slides to $63 on Ukraine's ceasefire hopes and that obviously helps India's margins, the India Energy Week segment.
Mahindra challenges Tata's EV dominance with a new $22,000 SUV.
KKR sees a $7 trillion AI boom as an industrial revolution and not a bubble.
And Sam Altman's allies face a reality check as Google's Gemini 3 gains ground.
The Calm Versus The Ruffled
When we started out in the year, the rupee was the calm one, and steady for that matter, and the indices were volatile.
It now appears that it's almost like the other way around. The currency has not been calm for sure, and the indices have been so. More on that in a moment.
It was a big day for the stock markets with the Sensex and Nifty finally hitting those record highs, though that was intraday, and then they returned to close at slightly lower levels. But even those records concede a lot, and we will come to that. At close, the Sensex was up 110 points to $85,720 and the Nifty was up 10 points to close at $26,215.
But during the day, the Sensex hit a record high of $86,055 and the Nifty hit a record high of $26,310. The last peaks were in September 2024. The Nifty mid cap 100 and the Nifty small cap 100 were slightly flat and also down.
That's the small cap 100 was down about 0.5%. More on the story behind the story in a moment. But broadly, this is a very narrow market rise. And to talk about that, we will be joined by Devina Mehra, first global shortly.
And the picture, of course, is grim. Almost half of Nifty 50 stocks haven't even touched their all time highs, which means only a few large cap heavyweights have driven most of the gains. A report in the Economic Times says that trend shares have fallen 40% year to date and would have to just to reclaim their October 2024 peak.
TCS is down 23%. Wipro, Tech Mahindra, Powergrid, Infosys, IndusInd Bank, HCL Tech, Dr. Reddy's are all stuck in double digit losses for 2025, even as the Sensex and Nifty have risen 10% this calendar year. In all, that report says 23 Nifty stocks are languishing at least 10% below their all time highs.
The BSE small cap index is also down 5% in 2025, unable to recover its losses and the mid cap index is barely 2% higher. And then of course, there's that giant sucking sound being initial public offers and offer for sales, which are draining away investor funds, mostly to provide exits for institutional investors, domestic and foreign, apart from founders and promoters and not much money going into companies themselves, which could of course be used for economic expansion and growth. The rupee itself was not much changed on Thursday and closed at Rs 89.30 against the dollar, down marginally from its close at Rs 89.27 in the previous session, according to reports from Reuters.
The rupee has of course stabilised after touching a record low of Rs 89.49 last week, though analysts say depreciation risks remain amidst weak trade and portfolio flows and uncertainty around US-India trade talks. Yes, so while the indices did hit those much awaited record highs, uncertainty on the US-India trade agreement still remains. And we are of course still expecting that something will happen in a few weeks time.
Meanwhile, the International Monetary Fund has reclassified India's exchange rate regime after the rupee moved more freely and said the nation is well positioned to allow greater flexibility in its currency. The IMF labelled India's de facto currency regime as crawl-like arrangement, marking a change from the previous stabilised classification, it said in its annual country report for India released on Wednesday. Now, that classification of stabilised was to hint that the rupee was being managed, and that did not go down too well in some quarters.
Elsewhere, gold prices were steady on Thursday, holding near a two-week high as investors looked once again at the possibility of a US interest rate cut in December. Spot gold was holding at about $4,165 per ounce. Now, the contrast between the rupee and the market.
The rupee is currently Asia's worst-performing currency of 2025, also on track for its largest annual decline since 2022, and that was the year Russia invaded Ukraine and oil prices went past $100 a barrel. Second, the Reserve Bank of India has sold more than $30 billion of foreign currency assets since the end of July, according to Bloomberg Economics estimates, and of course managed to avert a new low in mid-October. At its strongest in early May, the currency was at about Rs 83.75 against the dollar.
And then, of course, things turned in July after the US and President Donald Trump imposed higher-than-anticipated tariffs for a variety of reasons, including purchasing Russian energy and weapons. After that, the rupee has kept falling. Now, let's look at the nifty.
Prior to Wednesday's surge, the index had logged a 77-day streak of intraday moves smaller than 1.2 percent, a first, according to Bloomberg Intelligence. It's also gone 132 sessions without a single-day swing beyond 1.5 percent. And what does that mean? It means that this is one of the world's steadiest gauges, according to Bloomberg strategists, and the three-month realised volatility sits at 7.4, well below the standard-imposed 500's 12.7. So, back to the markets.
Having hit their all-time highs on Thursdays, what do they tell us, that is, the indices tell us, and what do they conceal? I spoke with Devina Mehra of First Global and asked her in a wide-ranging conversation around equities that will play out over the weekend about what she was taking away from the journey so far on the day that the markets saw their all-time highs.
INTERVIEW TRANSCRIPT
Devina Mehra: One thing which they will not tell you is that, I think for most of your viewers or listeners, their portfolio would not be touching all-time highs, because this has been an extremely narrow market. Especially up to August, it was very, very narrow. At that time, only about 10-12% of the stocks were outperforming the index, and I think something like 35% were down more than 50%.
So, I mean, in a normal market, you would expect about 40% plus of the stocks to outperform. When it becomes 20-25%, we say it is a narrow market. So, to have it as narrow as 10% is extremely narrow.
It has broadened a bit from there, but I think still only about half the stocks are down more than 20-25% from their all-time highs. So, I am sure the euphoria may not be as widespread as the indices show. The other thing to remember is that sentiment is a contraindicator, and this is not something I am saying, this has come out of research studies.
In whichever country the research study has been done, whether India, US, Portugal, Brazil, that when there is excess buoyancy in the markets, euphoria, I mean, like, if I go back, let's say, 15-17 months, not just the retail investors, I am talking ultra-HNIs, family offices were coming to me and saying, I don't have unrealistic expectations, I will be happy with 30% compounding. I said, that is an unrealistic expectation. But, I mean, last year it appeared the money was there for the taking.
I mean, people told me that, why do you say risk management first? Why do you say conservative management? We want to take high risk and get high return.
The only thing certain with high risk is high risk of losses. Nobody is guaranteeing high return. But the flip side to that is that when you are asking yourself, should I get out of the market, should I stop my SIP, is exactly when you should be invested.
Because the next period returns are above normal. I mean, that's the other side of the equation. And right now, if you look at the indices, there is no point looking at even at a crude PE level, looking at the index PE, because the composition of the index has changed so much.
I mean, you and I have been around long enough to remember a time when there were no banks in the Sensex and Nifty, and now that's the highest rate. At one point, these indices were full of PSUs, and then there came a time people forgot that PSUs were listed. So these are all cycles.
But if you look at the sectoral PEs, these are not at extremes. In many sectors, they are actually below even the last decade's average, and these are not on particularly great earnings. I see an uptick in earnings coming.
So between that and the fact that PEs are anyway not so stretched, I don't see grave danger in the market. So everybody understands the danger of being invested in the market, the risk of being rather invested in the market, but there's also a risk to not being invested. And we had done this data from the time Sensex started, which is 40-odd years.
So what if you missed out on the 10 best days? Now it seems like in 40 years, 10 days shouldn't matter, but actually two-thirds of your returns go. So instead of that Rs.100 becoming, let us say, Rs.85,000, you're now at Rs.27,000, Rs.28,000. If you miss out on the 30 best days, which is not even an average of one day a year, you miss out on 90% of the returns. So most of the time, unless you can foresee a really big crash, it pays to remain invested. But the other side of that is that you cannot buy and forget.
So don't think that I bought this stock last year at Rs.100, now it is Rs.65, I will wait till it is Rs.100. It will never come back to Rs.100, it may not come back to Rs.100. The market has absolutely zero interest at the price at which you bought. So you have to look at what is a good place to be invested today. Don't have loyalty and love towards your stocks.
So if you look at last year, a lot of that euphoria was in small caps and micro caps. And even now the PEs are quite high for that cohort. And I was not in hindsight, but at that time I had said, look at the history of small caps.
The small cap index fell nearly 80% in 2008, 78% to be exact. It took 8 years before it came to that level. But that's also theoretical, because the index churns more than 20% every year.
So 8 years later, it is a completely different index. And that's a characteristic of the euphoria in small caps in any cycle, that the stocks that do well in one cycle are not the same ones that come back. It's a whole different list.
In fact, even now I was looking at, I haven't quite collated the numbers, but I looked at it, that all the stocks that have gone from mid cap to large cap, small cap to mid cap and the other way around. And always the number of stocks falling down from large cap to mid cap and mid cap to small cap is more than the number of stocks that go up the list. And after I was at 2016, so 17, 18, again, there was this mad bull market in small caps.
And again, there was a two thirds fall. So last year, many of these small cap managers who were saying, we've given 50% compounding for three years. I said, don't forget your school maths.
When you come down 80% and then you compound 50% for three years, you are still down more than 30%. So that's the nature of the beast. I mean, always remember.
I mean, again, you will remember this, that how many IPOs came in the 90s. There were two years when there were more than a thousand IPOs each. And today only about four, four and a half thousand stocks trade actively.
And the number of listings on the Indian market is, I think, more than three times that, if not even higher. So that means, you know, more than two thirds of the stocks ever listed are not even trading. They have essentially gone to zero.
So that's the, that is the flip side of all those who tell you buy and forget or long term investing. That's, you remember the successes, you forget about the failures.
Govindraj Ethiraj: And if I were to go deeper into that, the small cap phenomenon that you talked about, so would that be sector driven as well? I mean, were there some categories or types of companies or sectors which suffered or saw more damage than others?
Devina Mehra: Yeah, there would be. And there are always these themes that sort of catch the fancy and then need not even be only small cap. So I always say that, yeah, I say the easiest rule of thumb to see where there is excess and excessive froth in the market is to see where the NFOs are coming.
Whenever there is a cluster of NFOs on a particular theme, and this I'm not talking just two years, we've collated the data for 25, 30 years, that it is a pattern that when there is a cluster of thematic funds being launched, it is almost always close to the peak of that theme. I mean, whether you go back to the early 2000s, the pharma fund, the IT funds, and whether it was defence, PSU, small caps, more recently, it always comes at the peak of the cycle because it's easy to raise money then. By that time, every person on the street knows about it.
There's this FOMO feeling. My friends made this money in this theme and I didn't, so let me get in. So that always happens.
Govindraj Ethiraj: And what would have sustained? I mean, I'm trying to single out sectors again. So you mentioned defence, maybe flavour of the month, season, and it's maybe gone now.
Maybe consumer tech is a flavour currently. We don't know right now. IPOs are mixed.
So what are the sectors or themes that have sustained through this period?
Devina Mehra: So, I mean, I can tell you how we were positioned in our PMS. So since last year, we have been overweight pharma, healthcare, and auto, auto components. We've added a little bit of autos. This year, through 2025, slowly, I mean, our systems have started liking FMCG more and more.
So we are now overweight FMCG. We are not overweight banks, but we hold more banks than we used to, especially PSU banks. I'm always a very nervous investor in banks.
People tell me, I would say that's your takya kalam that you say. Direct lending is a very risky business. So I'm always a nervous investor.
Govindraj Ethiraj: You chose PSU banks over private banks.
Devina Mehra: Yes. I mean, we do have private banks also. As I said, we are not overweight.
Also, remember, banking as a sector, if you look at last five years, prior to 2025, it underperformed in four out of the five years. 2020, 21, 23, 24. So other than 22, it did not outperform in any year.
So it is also a cyclical thing. And it is the highest weight in the benchmark, so I can't ignore it completely. Then what we've added very lately has been some of the OMCs, basically in the energy sector.
I mean, we're not overweight, but that's the thing. And IT, we would be slightly overweight, nothing very spectacularly overweight. But what a system forces us to do is to look at things on both sides, you know, unloved sectors.
I'll give you an example, like capital goods industrial machinery. Our systems liked it in October 21, and we went overweight. Most other funds and investors discovered it two and a half years later when the stocks had already gone up two, three times.
And the reason nobody looked at it before that was, for a good 12 years prior to that, it was absolute dog sector. From 2009 to 21, it compounded some 2%. So everybody said, you know, we won't look at it.
So that's why we use what we call a human plus machine system. So the artificial intelligence machine learning system, it kind of forces you to look at the data and not be married to the stories in your head. Yeah, it is not a black box quant approach, that's why we say human plus machine, but it does the first filter.
And my pin-up, Daniel Kahneman says that a system will always outperform a human being in any game of judgement. Even if it is a relatively simplified system, the very fact that it acts without bias, it acts without noise, the randomness that human beings bring in, it will do a better job. Besides the fact that, of course, it can look at, you know, many more companies, many more factors within a company, and apply it on the same basis.
I mean, globally, for example, we look at over 20,000 stocks. You know, even if I have a thousand analysts, they're not going to look at everything in the same fashion. That's the part that only a system can do.
Govindraj Ethiraj: Can I come to global innovation?
Devina Mehra: Right, right.
Govindraj Ethiraj: Tell me about an instance where, let's say, your emotion was superseded by your machine.
Devina Mehra: So as I said that, you know, maybe you would not have looked at industrial machinery, capital goods, because it had been such a dark sector. But in systems, this is something called a broken leg analogy, that the system will be better at predicting whether someone will go for a concert. So you should overrule only if you know for certain that person has broken their leg and won't go.
So that's the whole point that, I mean, we apply a filter after that. Sometimes we will not go by what the system is saying, simply because, you know, not everything is captured by past data. But there has to be a good reason for that.
So, for example, I'll give you in 2020, there was this whole thing of that you can't go wrong buying consumer brands which make a lot of cash. And I actually did a half an hour programme on CNBC where I broke it down saying that these companies have underperformed for long periods in the past. But the point is that at the time that FMCG was the flavour of the season, nobody was looking at ITC because that was not performing.
So for our systems, early 2021, suddenly ITC became very high up on the charts and we saw no reason to overrule it. So next 2-3 years, it was among our top 5 performers. So that's the sort of thing it forces you to do.
Govindraj Ethiraj: I remember interviewing Aswath Damodaran in peak COVID on a virtual conversation when we were sitting in New York. And where I asked him after everything, I said, what's your favourite stock? And he said, ITC.
And it was obviously in the boondocks at that time.
Devina Mehra: It must have been you invested jointly at the same time. Yeah, so early 2021, as I said. So that's what it forces you to do because human beings are creatures of the story.
We are very much married to the stories in our head. And without a system, you don't get over it. So that's the whole point.
A Strong Quarter For Oil Refiners
Even as the nifty hits a new peak, analysts at Antique told Reuters they expect oil marketing companies to deliver another strong performance this quarter, with refining gains and sharp reversal in cooking gas losses boosting profit margins. As long as crude stays in the $60-$65 per barrel range and retail prices of gasoline and diesel remain unchanged, these firms should enjoy elevated profits whether refining or fuel retailing drives the gains, they said.
Antique is bullish on the sector and has named at least one company, that's Hindustan Petroleum, as its top pick. Now, oil prices were down again on Thursday on expectations of a Russia-Ukraine ceasefire, which could lead to the unwinding of Western sanctions against Russian supply. Reuters reported Brent crude futures at around $63.01, that's $63 broadly a barrel, on Thursday morning.
More Electric Action
Mahindra and Mahindra has launched a 7-seater electric SUV on Thursday with a starting price of about Rs 20 lakh or $22,000 as it tries to take on a segment that's dominated by Tata Motors.
Electric vehicle car sales have been slow and perhaps steady. Sales of battery-powered cars have risen to more than 100,000 so far this year from about 23,000 units sold last year. Mahindra will invest another Rs 2,000 crore on the new car, that's XEV-9S and a new edition of BE6.
These are all electric models as part of a planned investment of about Rs 16,000 crore to develop electric-origin SUVs through fiscal 2027, according to a report in Reuters. Electric origin models are designed from the ground up and not adapted from petrol cars, which has been the case in several other brands as well. Mahindra's automotive division CEO said that with the XEV-9S, we are not just playing in the EV segment, we're expanding it.
Bookings open on January 14 and deliveries start on the 23rd.
KKR Investments into AI
Investment firm KKR, which manages about $700 billion of assets globally, has said that the unprecedented surge in data centre construction is the backbone of the next industrial revolution rather than the speculative bubble reminiscent of the dot-com era's fibre-optic collapse. In a recent analysis, the private equity giant acknowledged froth in the broader AI ecosystem, pointing out that a single chipmaker, NVIDIA, accounts for about 8% of the S&P 500, but says that the core physical assets will still yield compounding returns.
It also lists other data points, like McKinsey, which has estimated that companies will deploy about $7 trillion into global data centre infrastructure capital expenditures by 2030. You might recall we spoke yesterday about $25 billion-plus just going into Vishakhapatnam in Andhra Pradesh on the east coast of India. KKR has said that this figure, that's the $7 trillion figure, is equivalent to the combined GDP of Japan and Germany.
In the U.S., AI-related capital expenditures are estimated to represent about 5% of U.S. GDP and are currently growing at a high single- to low-double-digit pace annually, which is a trajectory comparable to the late 1990s and early 2000s tech boom. The four largest hyperscalers, KKR, Amazon, Google, Microsoft, and Meta are expected to spend more than $350 billion on CapEx in 2025. That's a roughly more than 30% year-on-year increase.
So despite all of this, KKR quotes JLL research data showing that North America co-location vacancy shows no signs of overbuilding, at least through 2027. So KKR is basically building its argument on the late 1990s Fibre 1.0 build-out, where a roughly $500 billion Fibre overbuild led to all kinds of shakeouts. It also says that data centres are fundamentally different due to inherent operational constraints and commercial structures.
Unlike Fibre, which has low marginal operating costs after installation, data centres are capital-intensive to build and expensive to run because of rising power and cooling requirements. And yes, they do pull in a lot of water as well. KKR says that there are also several modes, like power, land, grid connections, and permits, which make unconstrained overbuilds impractical.
Elsewhere, an opinion piece in Bloomberg on how Sam Altman's business buddies are getting stung has pointed out that SoftBank shares have tumbled 40% from late October. Oracle stock has given up all gains made since early September, when it got all of a sudden an AI halo after it announced a $300 billion computing deal with OpenAI. So the three are partners in the $500 billion Stargate AI infrastructure project, which aims to build data centres across the United States.
Investors are generally questioning, as you've been hearing on the core report as well, the chat GPT maker that's OpenAI's dominance after Alphabet released its newest multipurpose Gemini 3 model, which won glowing reviews, as well as how a weakened OpenAI may affect its partners' businesses, according to that Bloomberg report. So very broadly, AI is becoming a cash game, and those with the best balance sheets obviously have better odds. But when we talk about balance sheets, Alphabet still has negative net debt, despite repeated bond sales, and OpenAI, on the other hand, needs to continually raise venture capital to keep up with its expenses.
