The Head Spinning Greenland U-Turn Lifts Markets
Foreign investor outflows are hurting dollar sentiments
On Episode 780 of The Core Report, financial journalist Govindraj Ethiraj talks to Vijai Mantri, Founder & Chief Investment Strategist at JRL Money as well as Anindya Banerjee, Head – Currency & Commodity Research, Kotak Securities. We also feature an excerpt from our recent India Energy Week interview with Vikas Kaushal, Chairman and Managing Director at HPCL.
SHOW NOTES
(00:00) Stories of the Day
(00:50) The Head spinning Greenland U-Turn lifts markets
(02:50) Foreign capital is moving to safety, why is that?
(09:58) Are we nearing peak oil and what that means for India
(16:54) What's happening in the silver markets?
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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 Friday the 23rd of January and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital. Before we start, we do not have an edition on Monday morning being Republic Day, so a happy Republic Day to you and our top stories and themes…
The head-spinning Greenland U-turn lifts markets.
Foreign capital is moving to safety even as it flows out of India. Why is that?
What's happening in the silver markets
And are we nearing peak oil and what that means for India?
The U-Turn
The Wall Street called it Trump's head-spinning Greenland U-turn.
It was not just heads but markets which spun wildly in the last few days, including India, which is much further from recovering from the rout this week. On Wednesday morning, panic reigned in the snow-covered Swiss Alps when Trump arrived. By the time the sun set in Davos, Switzerland, on the same day, Trump had backed down.
The about phase followed days of back-channel conversations between Trump's advisors and European leaders, including NATO Secretary General Mark Rutte and German Chancellor Friedrich Merz. According to people close to the talks, says the Wall Street Journal, the Europeans stood united in their opposition to Trump acquiring Greenland, employed a mix of enticements such as offers to boost Arctic security and warnings, including about the dangers to the U.S. of a deeper rupture in the North Atlantic Treaty Organisation. After a meeting with Rutte on Wednesday, Trump called off promised tariffs on European nations as well, contending that he had formed the framework of a future deal with respect to the largest island in the world.
Now, this is important because it gives you a flavour of Trump's style of negotiations, particularly with those who push back, which in this case Europe appears to have done. Back home, the markets recovered on Thursday, snapping a three-day losing streak, but still a way to go before regaining the losses of the last few weeks. Trump's comments on a great trade deal between the United States and India also helped shore up sentiment.
The Sensex closed up 397 points to 82,307. The Nifty 50 was up 132 points to 25,289. In the broader markets, the Nifty Mid Cap 100 was up 1.3%, and the Nifty Small Cap 0.76%. The rupee broke its six-day falling streak to recover somewhat.
Of course, after that pullback by Donald Trump in Davos, it opened higher against the dollar and closed at Rs. 91.63, which is higher than its previous close, and the record low of Rs. 91.74 per dollar hit on Wednesday, according to Reuters.
Foreign investor outflows are hurting dollar sentiments, and Vijai Mantri, co-founder and chief investment strategist at JRL Money, says, the question to ask about foreign institutional investors who've pulled out more than $19 billion from Indian equity markets is not so much about why FIIs are selling India, rather why is global capital, including in the US, moving to safety. I reached out to Vijai and began by asking him how he was seeing FII flows outward, or rather outflows, and his outlook for the markets in the near term.
INTERVIEW TRANSCRIPT
Vijai Mantri: So one is that if valuation is the concern, then Indian markets are at 22p multiple and US market S&P is 26p multiple. But large gain to the US market is accrued from Mega 7, and their p multiples are much, much higher. And wherever you've seen the market performance, for instance, Korea 73%, Taiwan 29%, China 28%, Hong Kong, most of these gains in these markets has come A, from a very limited pool of stock.
So for instance, if you look at USA, more than 50% of gain has come from only 7 stocks. In China, number of stocks are 7. In Korea, number of stocks are 2.
And in Taiwan, number of stock is just 1. And if you look at all these stocks, most of them are AI or AI linked. So the money is moving out from India, not necessarily in a diversified pool, but is going into more concentrated and perhaps one part of the economy.
The second which is very important factor to keep in mind is that though in 2025, India underperformed, but India hugely outperformed for many, many years. And the market which outperform India, most of them were underperforming for last 7, 7, 10, 10, 15, 15 and 20 years. So one need to keep that in mind.
Second thing is money is going and perhaps someone believe the money is going in US market, then we need to keep in mind two very, very important data point. One is that what is Bakshi Hartford doing? More around one third of the portfolio is in cash, is a staggering amount of cash they're holding.
And second, if you look at US mutual fund data, then in last two years, the investor has pulled out close to $2 trillion from hybrid and equity funds, and they have poured in $1.5 trillion into money market and debt-orientated mutual funds. So when FI is taking money out, I think it is more of a currency play, it is more of a momentum, it is more of opportunist rather than anything is structured. And if you just look at Indian market, I gave a data about US market or Chinese market or if you look at Indian market, just look at Nifty alone, which delivered close to 10.5% return in 2025. Out of 50 Nifty stock, 32 deliver positive return and 26 stock of Nifty 50 has delivered more than 10.5%. And the sector of the economy which participated is varied sector to just not from one or two sectors. So India offer you much broader opportunity to participate. That was a point I was making in my note.
Govindraj Ethiraj: Sure. But you're also saying that if Bakshi Hartford, for example, is sitting on 31% cash, there is a larger question of safety. So the question really from me is why is there then this movement towards safety?
Vijai Mantri: So I think one is that lots of money is going into hard asset, maybe metals, precious metal and soft metals, and maybe partly it is going into high risk area like AI and AI related stuff. So I think the most of the money is going into do kind of sector. Money is not going into other stock like if you look at US small cap Russell 200 is a massive underperforming.
And even if you look at China, the Chinese market, most of the gain has come from AI. So most of this money is going into the AI and people believe that India don't have AI story. And that is perhaps is the one reason.
And second is that because of tariff and geopolitics and currency has been depreciating. So these are two, three factor why FIs are taking money out. But I believe moment interest rate is start going up in US which is inevitable because energy prices and food prices are shooting up.
Ultimately interest rate will not be kept low and that perhaps could trigger some challenges to the US market.
Govindraj Ethiraj: Right. Coming back to India, this quarter rather the latest quarter was supposed to be a turnaround quarter in some ways, but that doesn't seem to have happened at least going by the results that have come out so far. What's your outlook?
Vijai Mantri: So I have looked at data for Indian market for last 25-30 years. So what we have witnessed that there's a phases where GDP expansion take place, but the earning doesn't take place. And then there are phases where earning grows, but GDP doesn't grow.
And the phases where both grows and market doesn't grow. Right now we are in the phase where GDP is expanding, but earnings are not kicking in. And that period last four, two, two, three is not more than that until as we see GDP collapsing which India has not witnessed.
So in my opinion, just a matter of maybe six months, two and a half years from this level. And we believe this is a fantastic accumulation phase for Indian investor to participate because India has much better structural story. So if the earning is not coming, it means the earning will come a little later.
Ultimately earning has to catch up with GDP is expanding, the earning need to catch up.
Govindraj Ethiraj: Right. Vijay, we've run out of time. Thank you so much for joining me.
Vijai Mantri: My pleasure.
Gold
Gold prices softened somewhat on Thursday, pausing a three-session rally to record highs, thanks again to what's happening on Greenland or not happening.
Spot gold was down slightly to $4,824 per ounce, after falling about 1% earlier in the session. Remember, the optimistic projections for gold later this year were about $5,000 an ounce, so we're very close to that number already. Bullion is up about 12% this year, having hit a record of $4,887 per ounce on Wednesday, according to Reuters.
Elsewhere, spot silver was up at about $93.71, and it had hit an all-time high of $95.87 on Tuesday, and much more on silver shortly. Meanwhile, a report from Crisil says, assets under management of non-bank finance companies, or NBFCs, specialising in gold loans, is set to see a compounded annual growth rate, or CAGR, of 40% between this year and next, going past 4 lakh crores, or that's 400,000 crore rupees. That surge will be driven by elevated gold prices' shift towards secured credit and an evolved regulatory environment, outpacing the 27% CAGR between fiscals 2023 and 2025.
So, gold prices, as you know, have been shooting up, and they were up about 68% in the first nine months of this financial year, and obviously to an all-time high, as we just spoke. High prices obviously helps collateral values, enabling lenders to scale up disbursements, according to Crisil. Crisil also says, streamlining of loan-to-value norms for lower-ticket-size gold loans applicable from the 1st of April this year is expected to provide additional headroom to NBFCs for lending.
Oil Slips
Oil prices fell on Thursday, reversing gains in previous sessions after US President Donald Trump softened his stance against Greenland and Iran, and crude was down to $64.17 a barrel on Thursday afternoon, and West Texas Intermediate was about under $60, that's at about $59.60. Meanwhile, how is India poised this year in overall oil sourcing and refining capacities? As part of our India Energy Week series, I caught up with Vikas Kaushal, Chairman and Managing Director of refining major Hindustan Petroleum Corporation, who also took charge in March 2025. Kaushal earlier worked with consulting firm Karni, or AT Karni as it used to be called, as global head energy and process industries, and this is also his first exclusive sit-down interview. I began by asking him about P-Coil and what he was seeing from his vantage point, particularly in the Indian context.
INTERVIEW TRANSCRIPT
Vikas Kaushal: We are blessed to be in the middle of that sector. We expect this growth to continue. People talk of peak oil traditionally, even as a consultant earlier I used to talk about peak oil around 2040 or something in Indian context.
If you look at the latest projections, IEA projections, etc, they are actually talking of peak oil much later. So we expect the oil also to keep growing and this obviously provides an opportunity for companies like us. So in a nutshell on the energy sector, we expect a very vibrant, growing, expanding sector which gives opportunities to both the incumbents, the new players, you have a lot of startups and all kinds of services being provided.
So that's the whole ecosystem on the energy side. Talking of HPCL, we've traditionally been in a midstream, downstream sector, refining and marketing. A lot more skewed towards marketing but over the recent years we've been ramping up our refining capacities also.
So as I speak, we have close to about 25 million tonnes on our balance sheet. We also have a joint venture with the Mittal Group which adds another 13 million tonnes and then our Barmer refineries in advanced stages of progress and very soon we will start having that also as an additional refinery. That's of course a joint venture with the Rajasthan government that gives us close to access to about 45 million tonnes of refining products.
We sell about 50 million tonnes of product in the market and that's the core of our business. Parallelly, what we are also doing is we are wetting our feet onto new energies. We've been experimenting with solar, we have some wind farms also.
We are trying to find out what's the sweet spot for us. Should we do the large solar, should we do small solar, should we do directed solar at some customers, you know, the bulk customers etc. We've been doing biofuels.
We have one of the largest working CBG plants in Badaun. We are trying to ramp that up. It's a new nascent technology, everybody is getting their feet wetted on that.
We are trying to ramp that up. Similarly, we've just discovered probably the lowest price for hydrogen in India for a plant in Vizag. Besides that, we have our own pilot in hydrogen.
We are also doing research in hydrogen. We are expanding on the gas economy. So, I would say as HPCL, we are deep into the oil sector, growing, fortifying ourselves, expanding and yet also pivoting and preparing for the future.
Govindraj Ethiraj: Going on to 300+. Now, tell us about how this equation is moving vis-a-vis what we are importing. Of course, we are importing more than 80% of our crude requirements between how much we are producing as finished product and of which we are exporting some as well.
So, between domestic production, domestic consumption and global sourcing of raw material. Walk us through that equation.
Vikas Kaushal: So, I think just take, anchor it at around 260 million tonnes just to round it off. As you know, crude mostly is imported in India. Different years are different numbers, but it's about 85% is imported.
Remaining is Mumbai high and some other domestic fields which you are looking at. We are importing all the crudes and as a country, I think we import crudes from dozens and dozens of the country. I can talk more specifically of HPCL.
We, in a year, import crude from at least two dozen or even more countries. We have capabilities of processing up to 200 kinds of crude in our refineries. There are other refineries in India which are slightly more complex.
They can even process more number of crudes than we have. So, that's the range we have. It gives us a flexibility on sourcing the entire thing.
But coming back to your question on how the whole equation works, see, we sell about, as a nation, we consume about 100 million tonnes of diesel, another 40 million tonnes of petrol, yeah, another 33 or 35 million tonnes of LPG and then there are a lot of other products. So, if you add all those up, the 260 which is being refined, I think, I don't remember the numbers exactly, but somewhere in the range of 200 or 200 plus million tonnes is what we consume in India. Maybe a shade more.
And then there are some which we export. There are some refineries which are very focused on importing and exporting, but likes of us as HPCL and some of the other state-owned oil marketing companies, they are more focused on importing and supplying internally. Now, where is the demand growing?
If you look at petrol demand, MS, as we call it, is easily growing at mid-single digits. So, it's a 40 million tonne market already growing at six, seven, five, whatever some numbers can be, but mid- single digits, it's already growing. Diesel, 100 million tonne market already growing at its low single digits, not as much as MS. MS has gone post-COVID, MS has gone higher, but it's also adding a couple of million tonnes per year. LPG, a 33, 35 million tonne market growing at 8 to 9% a year. So, adding another 3 million tonne. And then there are other products, big two men and other products.
Govindraj Ethiraj: Aviation fuel is double digits.
Vikas Kaushal: Yeah, double digits. It's probably the fastest growing segment. If you really look at it, just on the consumption side, you can translate a few million tonnes of petrol, say 2, 3 million tonnes, 2, 3 million tonnes of diesel, add LPG, etc.
We're roughly needing an 8 to 10 million tonnes of additional refining capacity a year just to keep pace with the demand. The good thing is, in India, we know we don't import much now. Hardly, there are some specific grades people import for some things, and there are one-off times.
We probably are the ones used to import most because of the refining and marketing gap. But even we have not imported a cargo for, if I remember correctly, for two, three years now. Most of the refining is geared towards India, but there is certainly things being exported.
Now, in terms of sourcing, I think there is adequate amount of crude which is available globally. I know it's a very geopolitical subject and a lot of different tensions come into the entire thing. But purely looking at it as a refiner, we do have a choice of sourcing of crude.
We go to market literally every week to source cargoes. And we look at what's most economically viable. And that's a decision we as a management team take.
Silver
Silver futures fell on the multi-commodity exchange on Thursday amidst those easing geopolitical tensions, which obviously reduced safe-haven demand. MCX silver prices were lowered by 4% to Rs 305,000 per kilogramme, roughly. From its all-time high, silver on MCX is lowered by about Rs 30,000.
However, even as silver futures fell 4%, the fall in silver exchange-traded funds, of which there are quite a few on the exchanges, was much starker, while on the other hand, premiums between domestic and international silver prices have widened, prompting some concern and even panic. Meanwhile, there's a new report from Kotak Securities on the theme of silver. It's called Silver from 50-Year Suppression to a Structural Supply Shock, a timely analysis of one of the most critical shifts unfolding in global commodity markets.
And it argues that for 50 years, silver prices were heavily suppressed, despite silver being a monetary metal, and that's changing. And how is that happening? I reached out to Anindya Mukherjee, author of that report and head of commodity and currency research, Kotak Securities, and I began by asking him what was changing in the silver markets.
INTERVIEW TRANSCRIPT
Anindya Banerjee: It all started, I think, a couple of weeks back. There was a sort of a rumour in the market that the government is becoming quite uncomfortable with the surge in silver imports. India has been importing a huge quantity of silver, annually something around 5,000 to 7,000 tonnes, depending on the year.
Because of its stock wars, one way to curb or slow down the imports is to put an import duty on it, which, yes, it gained a lot of traction. And once the premium started to come in, especially on the MCX futures, compared to the landed cost, that story started to get a lot of traction. But actually, what transpired, in my opinion, was after the New Year's, there was a kind of a FOMO in the Indian retail market.
So they started, because silver prices were constantly rising, gold prices were going up steadily, silver was skyrocketing. So they started to pile on to the market. There were two avenues of piling on.
One was the MCX futures, the other one was the ETF. Now, because of that massive demand, what started to happen is that the MCX, and plus, what happens is whenever the MCX futures, let's say, starts to put a premium of 3-4%, even 2-3% kind of a premium over the landed cost, the arbitragers step in. But this time, the arbitragers were not able to step in, because when you do an arbitrage between the physical and futures, you have to buy physical, and you have to sell the futures.
So it means you're putting a short position. But when the market starts to run like this, almost double in, I think, a month, what happens is your map-to-market pressure increases, because you have to pay the map-to-market on the exchange in cash, not non-cash, collateral. And it becomes a huge strain for any player to get constantly so much of cash.
And especially with the money market, the interbank liquidity tight, the money market rates have also hardened a bit. So that reduced the arbitrage, that's one. Second, what happened, a lot of these jewellers, they had hedged their stock inventory in the market by selling short, let's say, on MCX.
They also started to get into trouble, because they now have to cover higher and higher map-to-market, as well as increasing margins. So that led to a situation where they had to square up their shorts. And due to all these things, the speculative buying, cutting of shorts by the hedgers, arbitragers staying away from doing the arbitrage, the premium kept on rising.
And ETF, which was also seeing a lot of demand, that started to track the MCX prices. And that also started to quote a premium to the NAF. And this is where the whole story started to gain traction, that this premium will stay till budget, because there could be a potential import duty hike.
But if you look at gold and silver, gold had some premium, but it didn't have this kind of a premium. So which basically, it looks a little unlikely where government will hike the import duty on silver and not do an import duty hike on gold. That's one.
Second, unlike gold, silver is a very important critical mineral for a lot of industries, the solar industry, where we are trying to achieve scale. And we are competing with China, plus the electronics, the electrical, all these industries. It looks a little unlikely that the government will go for an import duty hike and create a disadvantage for the end users.
Govindraj Ethiraj: Right. To come to your report, Anindya, where you've talked about when a monetary metal becomes a critical mineral, and the pendulum swings, and the pendulum you're referring to is the shift from what you've said, markets don't stop at fair value, they overshoot. And the pendulum is now swinging from one extreme to the other.
So what does that mean in the context of silver?
Anindya Banerjee: So what has happened is that for the last 50 years, silver prices have been capped under 50, largely under, I would say 30-35 dollars. So because of which what has happened, this new industries which has come up over the last 10 years, the electronics industry, the green energies, the electricity industry has also started to use silver. So this suddenly found a high performance metal at a very cheap price.
So the entire technologies got built around this silver, wherever they could use silver. For example, an EV car manufacturer would be using typically silver anywhere between 15 to 30 grammes. Now that price has increased substantially.
So suddenly the industry finds itself that the price they had assumed was not a price which can be sustained. And now that re-rating is happening. So the industry needs that metal.
It's not like gold that the investors only piling up or the central banks are piling up because they are trying to get away from the dollar. So here you actually need the metal, for example, a phone manufacturer or a solar panel manufacturer or an EV manufacturer, and that silver gets depleted, consumed, and it is not easily recyclable. So this is where the whole story around silver has formed.
Suddenly you have a situation for the last five years, the metal has been in deficit constantly. That has depleted the above ground supplies. You have a situation where 80 percent of the metal comes from the mines of other commodities, gold, zinc, copper, etc.
Which means the supply response cannot happen, at least not in the medium term. It would take a long term for the supply response to happen from mines. Plus you have a situation where the same thing which happened here with the dwellers.
Internationally also, these hedgers, the miners, they are finding it difficult to maintain their hedges because the prices are rising very rapidly. Suddenly they have to cough up a lot of margin and mark to market, which is becoming untenable and they are reducing their hedges. So the supply is again reducing.
Plus you have the bullion banks who have also reduced their kind of activity in the market because they used to be the market makers and maintain the metal prices globally around LBMA and comics. But if you see currently what is happening, LBMA and comics, which is New York and London, silver prices are at a constant discount to Shanghai. And now even Indian prices have started to quote a premium, which is trying to get close to the Shanghai.
Basically, we are having a situation where globally a dual pricing is emerging in silver, where in the West, it is the paper pricing of silver, which is at a discount. In the East, it is the metal pricing, which is basically if you need the hard metal, you have to pay up. So in this kind of a situation, the bullion banks are unable to create that kind of liquidity because they are operating in the West, but the prices are at a discount.
Now, so the supplies are reducing and plus the governments are also restocking a lot. It's just not an industrial mineral anymore. It's a critical mineral.
So that's also happening. Plus now the speculators, the investors, the asset allocators, they're also coming in because the prices are rising. They are seeing silver as a hedge against collapsing dollar in the sense the way the dollar is getting debased, like we are seeing against gold.
Silver also is a kind of a gold monetary metal. So all of these demands are coming when the supply is reducing. So naturally, the industrial player who has to consume the silver is becoming quite nervous.
In this situation, the question comes, who will supply the metal in large quantity? It will be only basically those private investors who have accumulated the metal at our low price. But generally such people wait for the prices to rise substantially before they can start liquidating their physical holdings because the prices have just crossed a 55 year old range because it always used to hit a high of around $50 and come back.
That has been the case since 1980, Hunt Brothers. It has just crossed and it's still double digit. There is still a long way to go where it can elicit this kind of a response from the large private investors or it creates a demand destruction from the industrial sector.
So either ways.
Govindraj Ethiraj: Right. I mean, you've called those private investors the whales. And you also, I think, asked whether would this dump supply at 93 plus or 95 in that range.
So the question, therefore, now is what does all of this mean for prices as you look ahead? And are you seeing silver continuing to rise because of all the structural supply reasons that you just pointed out?
Anindya Banerjee: Yes, the overall path for silver is upward because as I said, silver is also a monetary metal. So because gold is quite expensive compared to silver, a lot of the monetary hedges, for example, it may not be a central bank directly, but a lot of these private institutions, and we are talking to family offices, when they're looking at edging their de-dollarization risk, they're also considering silver. Right.
So that kind of a demand, which is extra for the silver market. Plus it has this industrial case, which I just made. So yes, the path of silver is upward, but volatility is going to be very high because unlike gold, this market is not that large.
So when you have very large kind of demand, also speculative demand, and we just saw what happened today in the ETF market, we saw the same thing in October also of last year, that the speculators, they tend to accentuate the move. So that kind of a volatility will be there. But I would like to point one thing that what can create a big correction in the market?
I won't say a collapse, a correction, let's say anything between 25 to 30%. It is if we have a big fall in the global stock market, especially the US tech AI led teams, because silver is directly linked with the AI team, because the electrical, electronics, everything. So it's linked with that team.
If you have a big fall, like we saw in April of last year, when Trump had imposed the reciprocal tariffs, and we saw a big fall in the equity markets and subsequent fall in the silver rate fell 20% in three weeks. So that kind of situation, silver can come under pressure because of the margin calls. But again, it's a correction where it will be bought.
Otherwise, a 10-15% corrections will keep happening technically from time to time, but the path is upward.
Govindraj Ethiraj: Right. Good note to end on, Anindya.
Thank you so much for joining me.
Anindya Banerjee: Thank you for having me.
