The Markets Are Up As FIIs Step In For Some Late Or Early Buying
A Santa rally seems a little more plausible and we still have two trading sessions to go.
On Episode 758 of The Core Report, financial journalist Govindraj Ethiraj talks to Sandip Agarwal, Fund manager at Sowilo Investment Managers LLP as well as Parizad Sirwalla, Partner and National Head – Tax, Global Mobility Services, KPMG in India.
SHOW NOTES
(00:00) Stories of the Day
(01:09) The markets are up as FIIs step in for some late or early buying
(11:28) Why an appreciating Thai Baht should concern us all
(13:16) The surprise market that beat Wall Street in 2025
(14:10) Geopolitical tensions drive up oil and gold prices
(17:09) India-New Zealand sign third FTA for India this year
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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 Tuesday the 23rd of December and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai India's financial capital. Before we start a quick alert our last daily news podcast for this month and year will be tomorrow morning. From Wednesday we will switch to a few special interviews we've lined up which look back at the year and then at 2026 in the context of the economy and stock markets before going on to one surprise and hopefully interesting interview.
Our top stories and themes meanwhile for today…
The markets are up as foreign portfolio investors step in for some late or is it early buying.
The surprise market that beat Wall Street in 2025.
Why an appreciating Thai baht should concern us all.
Geopolitical tensions drive up oil and gold prices
And India New Zealand signed the third free trade agreement for India this year
The Santa Rally
Well a Santa rally seems a little more plausible and we still have two trading sessions to go.
While the previous two trading sessions may not qualify as a proper rally on the other hand the upswing is of course welcome helped of course by the perception that foreign portfolio investors are doing some late or early buying having bought about 3,700 crores worth of stocks in the last three sessions bringing down the net outflows for this month according to Reuters. Otherwise the nifty 50 saw three consecutive weeks of losses with sentiment which is continuing to be weighed down by the delay in a India-US trade deal. The latest in that is another promise by India's trade minister on Monday that a deal is closed.
It's possible but we will have to wait and watch and also we don't know what the contours could be. Meanwhile in a deal where we do know the contours India and New Zealand signed a free trade deal and more on that shortly but India has stood firm on not allowing dairy imports into the country. Something that's not going down well on the New Zealand side by the way because New Zealand is a lot about dairy.
But the good news is that India is moving fast on the trade front as much as it can possibly. On Monday the sensex and nifty 50 were higher and built on Friday's gains. The big buying was in IT and metal stocks and more on IT shortly.
The sensex ended about 638 points up at 85,567. The nifty 50 was up 206 points at 26,172. The broad markets were up two.
The nifty small cap was up 1.1 percent. The nifty mid-cap was up 0.8 percent. Elsewhere gold was past the 4,400 dollar per ounce level for the first time and that was on Monday on growing expectations of further U.S. rate cuts and of course strong safe haven demand thanks to the fresh part of geopolitical tensions and now in the Americas and linked to oil which we shall come to shortly.
Silver also hit an all-time high. Spot gold specifically was at about 4,411 dollars per ounce while spot silver was at about 69 dollars 44 cents. Just to recap the data point we've been well recapping almost every other day bullion has now gained 67 percent this year and is now set for its biggest annual gain since 1979 according to Reuters.
Silver is up 138 percent and obviously outperformed gold. Before we move on let's get a sense on where market sentiment is right now particularly in the context of IT where we've seen some action and the rupee devaluation which is one of the triggers for it. I reached out to Sandip Agarwal, principal officer and co-founder of Sovilo Investment Managers who also specialises in tracking the IT sector and I began by asking him how he was seeing the most recent rebound.
INTERVIEW TRANSCRIPT
Sandip Agarwal: There were few things which have pulled down the market in last 4-5 quarters. So, most importantly, you know, we were the most premium market in terms of valuation and our earnings has slowed down because of some liquidity squeeze out which happened before that. And if you see now, you know, last few months, RBI has injected enough liquidity and also, you know, government's GST rationalisation and some of the reliefs on the income tax side of each one thing is basically giving more disposable income in the hands of the people.
Also, remember that some of the industry this time suffered because of extended monsoon, right? For example, some of the companies which were in wellness products like talcum powder and glucondia and all, they also suffered because of extended monsoon. Also, some of the EC players have not done well.
The EMS industry has taken a hit. So, I think those challenges are now behind. Also, smart money which moved out of India, it went to Taiwan, South Korea, which have done phenomenally well.
So, now the premium of India which was always very, very high, that has narrowed down to very, very low level. And I think now that valuation concern is gone and with RBI's liquidity injection, the rate cuts which are substantial and also this GST things and other reforms which government has done, I think some green shoots of economic coming back on track is there. And also, there is a lot more comfort to valuation in our market.
And also, there is some discomfort in valuation in the markets where money was flowing out. So, you know, everything has come together. So, I think it is an all-round thing which is leading markets to go up.
And that's the reason you will see FII intensity of selling has gone down. Right now, the only thing which is probably irritating and concerning the market is one, the trade deal with the US. And the second thing is, you know, the consistent pressure on the rupee.
I think other than that, everything seems to be in place. And I am very, very confident that we will see a lot of good time ahead in next, you know, three months, six months, nine months, and 12-month period. We will see a very, very different Indian equity market.
I am very confident we will make new high. And not only new high, we will make a very, very substantial gain in Nifty from here in the next 12 months. I think that, you know, 30, 29, 30,000 is very much on the cards in the next 12 months.
Govindraj Ethiraj: Okay. You talked about valuations and why there is maybe a little more comfort in valuations today. So, can you use an example, I mean, of an industry, maybe like IT or some other sector?
Sandip Agarwal: So, you know, I would say that, you know, valuations have come off. Obviously, IT is the biggest underperformer. It is still down substantially in 12-month basis and valuations have come off quite a bit, which has also helped in pulling down the Nifty valuation as we look towards.
And also, same thing with FMCG. FMCG has been a massive underperformer and that has also helped the valuation multiples to come down. But I will say that, you know, still these two sectors where, you know, in IT right now what is happening is there is massive underweight across the board.
People have sold off IT long back and there is not much weight with local mutual funds and even the FIIs and all. They have sold into it. So, now with rupee depreciating so fast, people are trying to find a hiding space.
But remember that, you know, December is a seasonally weak quarter and also because of furloughs in the manufacturing. And again, in March, you have less number of working days in February. So, you cannot do well in these two quarters.
So, whatever the sector is doing is primarily to, you know, defend you from the falling rupee and also in hope that 27 will be a better year. It may be a better year, but I don't know whether that valuation which is still there, it can justify that. Second, on FMCG, you know, in last 20 years, my biggest concern, we have not taken any FMCG stock, direct FMCG stock in last 2-3 years because we are consistently monitoring the substantial fall in the population growth rate in last two decades.
If you see, it has almost halved. We don't have that natural volume growth which should come. It is falling.
So, that's the reason you will see most of our FMCG companies having very, very low volume growth and very, and little bit of pricing power. Now, with inflation coming down structurally, you will not see even that value growth happening. So, why to pay such high PEG ratios?
So, I think these two sectors are remaining, continue to be too in pressure. But some of the sectors which have gone down because of private CAPEX and government CAPEX not in tandem like, you know, the defence stock, the infrastructure stocks, the road stocks, the PC companies, the manufacturing companies, I think those things will come back slowly as spend comes in. Pharma has done reasonably well.
So, it will continue to do well because that is one space where there is no competition virtually in the developed market with us. There is very differentiated competition. So, we are phenomenally well-placed there.
Even IT, we are very phenomenally well-placed. The problem is that in IT, the penetration level in the mature market like US is very high. So, you cannot get much growth from there and efforts are falling by 20-30% due to AI.
So, that is the way I look at it.
Govindraj Ethiraj: Right. And I'm going to come back to IT in a second. And you mentioned population growth.
You mean growth in terms of, I mean, is that sort of directly correlating with demand for consumer products?
Sandip Agarwal: Yes. So, structurally, the growth rates are falling. So, what is happening if you see last 10, 15, 20 years, every year, the volume growth has been going down.
But only value growth is happening. That means that, you know, inflation rate, you are taking that kind of pricing hike. So, you're getting that 8-10% growth you were getting.
And also, shared growth was better because somewhere, you know, because of crude, the packaging cost and other input cost has gone down. So, you know, there has been a benefit. So, bad growth, hypothetically, looks like 11-12% with a 50 multiple.
People justify that, okay, you don't have to worry. The valuation is a back-ended one. You can predict the terminal growth rate and all that.
But I think that argument will fall apart slowly and people have started acknowledging. You see our growth rate, what was our population growth rate in 2001 and what is the population growth rate today? Our fertility rate has fallen below 2.
We are very close to, you know, going below replacement levels. So, obviously, you will not get volume growth in the country. What you will get is value growth only because of, you know, higher per capita income and all that.
So, only on value growth, you cannot assign a 50 multiple, 40 multiple to a sector in my view.
Govindraj Ethiraj: Okay. And to come back to IT and I guess the inevitable AI question, which is being posed now almost every day. How are you seeing that as we go into the next quarter and next year?
Are you seeing any more tangible impact of AI on, I'm talking about in the context of Indian IT services companies?
Sandip Agarwal: No. So, you know, what is happening is basically there is a counter argument because the sector has underperformed. So, you know, always there are people who try to make a rational out of it that, okay, buy now.
So, and they try to jump into the opportunity by seeing rupee depreciating. But if you read the arguments, the argument is that, you know, CapEx has been done so services will start. I agree to that argument that CapEx has happened in AI.
You have spent in GPUs, the server and all. That is largely that growth is behind. But now the growth in the services will come.
The problem with that argument is that there is an effort cut of 30%. So, whatever is coming, it is coming 30% lower. So, you have to compensate for that 30% lower.
So, even if in the next five years, let's say, or 10 years, everything becomes AI driven, then also every year you will be losing 3%. So, that getting that 3% growth in an industry, which is already, you know, in an industry where, you know, there is such a big trouble of growth. How can you project better growth and all?
There is also a counter argument of margin improvement and all that. Trust me, you know, all this will fade away. Just let the results come and companies are keeping shut because they are happy.
Stocks are going up for no reason.
Govindraj Ethiraj: Okay, last question. Sandeep, having spent a lot of time in the markets, do you see any specific patterns that usually play out at this time of the year? You know, people are expecting a Santa rally, for example.
I'm not sure whether that's happening. But in general, when you look back over the years, do markets exhibit any specific behaviour or is it difficult to predict each time now?
Sandip Agarwal: So, you will see a very abnormal spikes and fall in stocks because a large part of the player in the market, that is FII, they go on leave. The hedge funds do close their books. So, what happens, the market becomes very less liquid.
So, you will see, you know, spikes on either side, on the upside and downside both, because there is a major player in the market is out of the market. So, I would say that I will not call it a Santa rally because very tough to call that. But at the same time, I would say that you will see irrational price moves in stocks, both on upside and downside.
Govindraj Ethiraj: Sandip, thank you so much for joining me.
Sandip Agarwal: Thank you so much.
The Rupee and The Baht
The rupee fell on Monday after rising for three sessions as dollar demand from local firms and the non-deliverable forwards market eroded an intervention led rally though the currency was on the stronger side of 90 per dollar according to Reuters ending down at 89 rupees 65 paise. In the previous three sessions the rupee had gained against the dollar and it hit a one month high of 89 rupees 25 and that was the rupee.
If you were planning to visit Thailand things could get a little more expensive. The Thai bath is heading for its biggest annual gain against the US dollar in eight years and putting pressure on its exporters according to a Bloomberg report. Thailand's currency began to strengthen against the US dollar in mid-24 around the same time the government launched an economic stimulus plan and traders started selling the dollar ahead of the US federal reserve's latest cycle of interest rate cuts according to Bloomberg.
Thanks to this tourism is also being hit as a strong currency reduces Thailand's appeal as a low-cost holiday destination and the finance ministry in October cut its forecast for foreign arrivals in 2025 to 33.5 million from about 34.5 million. Now that number for India is below 10 million by the way. Chinese tourists in particular are shunning Thailand in favour of cheaper alternatives like Vietnam and Malaysia according to Bloomberg and Thailand's attempts to push back against the bath surge have been enough to lift foreign exchange reserves to a record 278 billion dollars as of December 12 which is half of the GDP and to put the Thai bath in the context of the rupee Thai bath equals roughly 2.88 Indian rupees and that figure has been rising or technically falling as the rupee has lost out against the Thai bath in the last year or so.
Meanwhile while we speak of markets that perform well including Wall Street you would perhaps have not noticed that one market that did even better was the United Kingdom's FTSE 100 or basically the UK. The FTSE 100 delivered the strongest performance in 16 years despite the economic backdrop remaining bleak according to a Bloomberg report. The UK's blue chip gauge has defied expectations in 2025 rising 19 percent and beating the S&P 500 and the euro stocks 50.
Elsewhere on the continent euro area mid-caps have been standard performers gaining 17 percent thanks to a more dovish monetary policy and government spending commitments according to that Bloomberg report. Broadly UK stock investors were rewarded with 6.5 percent total shareholder yield including dividends buybacks and mergers and acquisitions according to analysts who spoke to Bloomberg adding that all of this outpaces inflation guilt and cash.
The India Energy Week Segment
Oil prices rose on Monday after the US intercepted an oil tanker in international waters off the coast of Venezuela and tensions in Russia's war against Ukraine remained high all of which obviously is raising fears of supply disruption according to Reuters Brent crude futures were up now to 61 and a half dollars a barrel while West Texas Intermediate was at about 57 and a half dollars a barrel. So prices are rising because of those developments off Venezuela and the United States Coast Guard is pursuing or was pursuing an oil tanker in international waters near Venezuela in what would be the second such operation over the weekend and the third in less than two weeks of successful according to officials who spoke to Reuters on Sunday. Now even while all of that is going on nuclear power plants are restarting elsewhere in the world.
Japan took the final step to allow the world's largest nuclear power plant to resume operations with a regional vote on Monday which is a watershed moment says Reuters in the country's return to nuclear energy nearly 15 years after the Fukushima disaster. Kashiwazaki-Kariwa located about 220 kilometres northwest of Tokyo was amongst 54 reactors shut after the 2011 earthquake and tsunami which crippled the Fukushima Daiichi plant in the worst nuclear disaster since Chernobyl. Since then says Reuters Japan has restarted 14 of the 33 that remain operable even as it tries to wean itself off imported fossil fuels.
Kashiwazaki-Kariwa's total capacity is 8.2 gigawatts enough to power several million homes and the pending restart would bring 1.36 gigawatt unit online next year and start another one with the same capacity around 2030 says that report.
And sticking to energy some milestones India achieved a major climate one with 50 percent of its installed power generation capacity now coming from non-fossil fuel sources five years ahead of its 2030 target under the Paris agreement signed in December 15. India now has a total installed generation capacity of about 510 gigawatts of which 247 is fossil fuel and 262 is non-fossil fuel including 254 from renewable energy.
India added about 50 gigawatts of renewable energy capacity in 2025 taking total non-fossil fuel capacity to about 262 gigawatts according to a report in the PTI. India's Minister for New and Renewable Energy told PTI that India has seen record growth in 2025 with about 45 gigawatts of renewable capacity added between Jan and November led by about 35 gigawatts of solar installations.
More Free Trade Agreements
India and New Zealand have concluded the third free trade pact that's for India.
India earlier concluded free trade agreements with Oman and the UK. This free trade deal with New Zealand would help to double bilateral trade presently around 2.1 billion dollars. The agreement will eliminate or reduce tariffs on 95 percent of New Zealand's exports to India with more than half the products to be duty-free on day one of the pact while all Indian goods would have duty-free access to New Zealand.
New Zealand has also agreed to invest about 20 billion dollars in India in the next 15 years. Some data from the global trade research initiative. India exported about 700 million dollars to New Zealand led by aviation, fuel, textiles, pharmaceuticals and machinery.
New Zealand in turn exported about 587 million to India and that was dominated by raw materials, scrap metals, coal and farm linked inputs. Dairy trade is negligible and the government has reiterated that's the Indian government reiterated on Monday that we will not be opening up to any dairy products as such though the data shows New Zealand exporting about 1.07 or about a million dollars of dairy products to India in 24-25. Presumably these are value-added dairy products.
Services trade outweighs goods with India importing about 550 million in services from New Zealand mostly by education. GTRI says that the FTA alone is unlikely to unlock the full potential of India-New Zealand economic ties worth around 2 billion dollars as trade volumes are modest. Deeper ties will depend on people-to-people links and connectivity.
GTRI says the India-New Zealand FTA is less of a breakthrough than a foundation providing predictability and strategic alignment while leaving the task of expanding trade to follow.
Tax Codes
The government exactly a month ago announced the implementation of four major labour codes including wages, industrial relations, social security and occupational safety, health and working conditions.
Now while these codes have been broadly welcomed by industry there have also been questions and some concerns about the implementation and how it would roll out. So what are those key issues that have emerged in the last month and how are enterprises particularly large ones responding and adapting to these new codes and what's the feedback. I reached out to Parizad Sirwala, partner and national head tax global mobility services at KPMG in India and I began by asking her about what her initial takeaways were.
INTERVIEW TRANSCRIPT
Parizad Sirwalla: As you rightly mentioned, it's been a flurry of three weeks and these labour codes are effectively a very historic transformation in the whole labour law landscape of India. There are four codes which have largely subsumed almost 29 central government notifications. The official gazetted notification came out, you know, on that Friday, 21st November.
But while it did take a little bit of the industry by surprise, actually there was already a four to five year period, because the draft codes were already out in late 2020 or beginning 2021. So I would put it this way that the conversations today and this juncture are more about how do we comply, how do we understand these codes and less about why. Of course, ever since these, you know, announcement, definitely corporates and various industries, stakeholders have been responding to it with a mix of urgency and pragmatism as well.
And there is definitely, as far as these codes are concerned, there is a push towards, you know, recognising new age alternative workforce arrangements as well, like gig platform workers and, you know, certain aspects around contract labour as well. To your specific question on what are some of the issues that are being thrown up, I would rather say that, you know, more than issues, I would say that companies really need to navigate. It is a complex transition.
There will be certain short term changes or challenges and changes, but that would be part and parcel of any legislative reforms of this magnitude and scale. And maybe we can discuss a few of those if you would like me to.
Govindraj Ethiraj: Yeah, I think my first question really be, so if you were to take any illustrative industry, let's say apparel or gems and jewellery, you know, where could the, let's say the challenges of the kind you referred to be and how would or could companies navigate it?
Parizad Sirwalla: So actually, these labour codes apply to every organisation operating in India, regardless of your size, sector or structure. So that's the scale of it. And therefore, the need to assess the impact and come to a state of readiness is actually for all and sundry.
The extent and nature of compliance will, of course, vary depending on what is the organisation's business model, what is the workforce composition and the employment practises. And every company will have to do a very individual but a comprehensive impact assessment to identify which provisions are relevant to them. So for example, if the business is in the manufacturing unit, as an example, you may need to larger deep dive or prioritise certain occupational safety and health requirements that are specified in one of the codes.
Or if you're an organisation which is heavily relying on contractual labour, you might want to, you know, look at those ones aspects of contract labour and align yourselves. Again, if you're a corporate which is used to hiring a lot of fixed term or gig employees, then there are certain provisions to focus on social security aspects because for the first time, this kind of new age workers have been brought within the overall coverage. Similarly, you know, every organisation from the perspective of an employer, there will be different compensation structures and, you know, different payroll policies.
So for the first time, there is a very uniform definition of wage, which itself is a little open to interpretation. So all those reviews of the wage definition to ensure compliance will also need to be done. So all in all, transition and implementation is now real for all.
Govindraj Ethiraj: And amongst the people that you're talking to, what are people telling you, as in depending on which industry they are in, where are they seeing, let's say, if not challenges, the work ahead that they have to do?
Parizad Sirwalla: So I can tell you some of the immediate steps based on experience that, you know, companies are really gearing up for the task ahead. I would call it it's actually a phase wise approach to the transition because one must remember that labour being a concurrent subject, it's centre and state. So the rules, as we know, are parallelly being finalised, both at the centre and the state levels.
The centre rules should be expected anytime soon, as we understand. Whereas immediate first steps, you know, most of your leaders, particularly in the HR fraternity, are ensuring, first of all, you know, awareness because success of these massive goals is to first understand the interpretation and then aligning across various internal stakeholders, even within the business. So there's a detailed impact analysis being done for both financial and non-financial impact, again, depending on on-role, off-role employees.
So the whole evaluation, whether from a wage perspective, whether from a statutory benefit perspective, companies are in the process of embarking those exercises. In parallel, definitely the relevant stakeholders are also reviewing and overhauling the HR policies to ensure compliance with these codes and that could include a gamut of policies like overtime, leave policies, as I said, workplace safety policies, inclusivity policies, and, you know, strengthening the whole thing around accident reporting, contractor documentation, wage records, so on and so forth. Again, depending on the organisation and the workforce arrangements that you're used to, are doing that relevant mapping and classification exercise as well to see who's an employee, who's a worker, who's a contractor, who's a gig worker. So robust documentation will become a priority to mitigate any legal and compliance risks as well.
And of course, the end would culminate into perhaps getting your IT systems and your payroll systems to handle these new definitions, but that would be once the rules are out. So overall, I would say that, you know, at this moment, a lot of HR, finance, and legal stakeholders within corporates are actively engaging with relevant industry forums, business communities, and with, you know, vendors and partners such as us as well, first to stay apprised of these developments and, you know, look at ways in which these codes will be implemented. And of course, the rules, as I said, are awaited, particularly later on, even the harmonisation of the state-specific rules as well.
Govindraj Ethiraj: Right. You mentioned four or five types of industries, I mean, or categories, including gig workers. Where do you see, and you also said that industry broadly has had time to prepare for this because they were sort of, they knew that something along these lines was coming.
Now, where would you feel or which sector would you feel is most likely or has to respond the fastest or the most comprehensively as things stand today?
Parizad Sirwalla: As I said before, Govind, as we discussed, it is a cross. So there is no particular unique sector. It applies to every organisation operating in India.
I like to reiterate, it's regardless of your size, sector or structure, everyone will have to, you know, look at the impact and, you know, readiness. Definitely, if you are in a sector which has large number of fixed-term employees, you could be a GCC, you could be a manufacturing unit. The nuance may vary, but I would say depending, it has to be, you know, seen with respect to your customised organisation, but largely it has got a universal applicability across India, across sectors.
Of course, the scale would vary depending on the size and magnitude of the organisation.
Govindraj Ethiraj: Right. One of the concerns was that, you know, people might see a reduction in take-home salary and the government did clarify that it will not if the PF deduction is on the statutory wage ceiling, but anything you would like to add to that?
Parizad Sirwalla: So I would say that, you know, every company's compensation structure is very unique and different and a few themes do stand out in the codes. And the first and the most important one that you're also alluding to is this critical definition of wages. Earlier, what used to happen was that, as you know, there were so many different pieces of statutory legislation and each one of them had a different meaning of wages for the purpose of different retiral benefits like maternity, ESIC, gratuity, so on and so forth.
Now there is a uniform and a consistent definition of wages for all your retirals. So it's a very inclusive definition which does throw open some interpretation challenges. I would say one has to, you know, really read this definition, consult when in doubt.
There are no easy answers because there are certain inclusions, there are certain exclusions, and there is a camp on those exclusions as well. So hopefully, you know, as the government regulators have also said, they come out with further illustrations. Otherwise, the definition is in the wage code itself.
It will be very specific to your individual compensation structure, but there are certain interpretation issues there.
Govindraj Ethiraj: Right. Good note to end on. Parizad, thank you so much for joining me.
Parizad Sirwalla: Thank you for having me.
