The Markets Coast On Election Results
With a firm election result and strong global cues, notably from Wall Street, it was almost a no-brainer for the markets to go up once again on Monday
On Episode 442 of The Core Report, financial journalist Govindraj Ethiraj talks to Karan Taurani, Senior Vice President at Elara Securities as well as Ayaz Memon, veteran sports writer and commentator.
(00:00) The Take: Where Is Consumption Going?
(04:21) The markets coast on election results, it could be tougher here on.
(07:20) The rupee’s best one day gain since June
(09:34) Fast fashion is doing well as groceries pull back from malls. Takeaways from how Indian consumers are consuming, including in the recent festival season.
(19:09) IPL 2025 auctions have kicked off with fresh records. What does this mean for the season?
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 Tuesday, the 26th of November and this is Govindraj Ethiraj, headquartered and broadcasting and streaming from Mumbai,
India’s financial capital.
The Take: Where Is Consumption Going?
At a mall near our office, a new Uniqlo store opened last week.
The over 18,000 square feet store is the third one in Mumbai and the first in south Mumbai and the 14th in India for the popular Japanese fashion retail brand.
On that day last week, almost everyone in the mall appeared to be walking around with Uniqlo shopping bags, a sign that they had come to the mall pretty much to shop at Uniqlo, at least on that day.
Uniqlo’s attraction is good quality at affordable prices, including its popular plain T shirt collection being offered at Rs 990 each.
The Uniqlo experience also reminded me of the recent blowout bookings for Mahindra’s new Thar Roxx jeep which received 176,000 bookings within an hour and now has a waiting period that could run into 2026.
Elsewhere, five star hotels in Goa are full and are quoting at prices which are a king’s ransom even before off peak season. And rates into December in case you were looking start at Rs 30,000 or so for the 5 stars and go upto Rs 70,000 per night.
Obviously, you could get deals if you hunt hard but those are not really deals are they ?
Not surprisingly, Indian vacationers are catching flights to Hanoi, Phuket, Bangkok, Bali and for the slightly more adventurous, Baku and Almaty in central Asia. That is if you are not going to the Emirates already.
Which brings us to the question for the Take.
Have Indian consumers hit their value ceilings ?
The Federation of Automobile Dealers Associations president told me several months ago that average prices of cars had gone upto Rs 10 to Rs 11 lakh per car in recent years and it would be tough for people to afford them, particularly when incomes had not kept pace.
Maruti Suzuki Chairman R C Bhargava said roughly the same thing more recently though he ascribed the reasons for car prices going up, including new emission standards. More importantly, he said that sales of small cars would not pick up as such till incomes caught up.
So if incomes are growing steadily or just about either keeping pace with inflation or a little ahead, it stands to reason that consumers would reach a tipping point and take a call to slow down on the discretionary expenditure or stuff that you can do without right now.
Has that tipping point arrived ?
Anecdotally the answer is yes because all the evidence points in that direction, and by the way you can add affordable housing apart from entry level to that list of items where purchases have slowed down.
The larger issue in some ways is also the propensity to spend.
It does appear that propensity to spend is slowing down too. Intent is different from ability because intent is based on perceived need and your outlook on future incomes. It is also based perhaps on what your peer group is doing or not doing.
If people around you are slowing down on discretionary spending, quite likely you would follow. It does not matter whether your income is steady or not.
While we keep looking out for data points on the consumption side beyond what slowing consumer facing company sales are telling us, it is perhaps a good time to take stock of where consumers are today, seeing value and not.
A Uniqlo store opening or a Mahindra Roxx launch may see blowout sales but that only shows that consumers are willing to occasionally spend because they see value or see something attractive.
Otherwise, they are holding back. Remember, access to small loans has also become tougher as non bank finance companies have had to tighten their lending norms.
Of course rural spending is stronger in recent months because of good monsoons and pent up demand. That will not make up for the urban slow down but it will provide some cheer for now.
And that brings us to the top stories and themes for the day.
The markets coast on election results, it could be tougher here on.
The rupee’s best one day gain since June
Fast fashion is doing well as groceries pull back from malls. Takeaways from how Indian consumers are consuming, including in the recent festival season.
IPL 2025 auctions have kicked off with fresh records. What does this mean for the season ?
Can The Markets Hold The Gains?
With a firm election result and strong global cues, notably from Wall Street, it was almost a no-brainer for the markets to go up once again on Monday. And they did.
The BSE Sensex and NSE Nifty50, ended the first trading session of the week on a higher note with the BSE Sensex closed up 992 points at 80,109 points while the NSE Nifty50 also ended higher by 314.65 points or 1.32 per cent at 24,221.90.
Both indices were higher during the day before coming back, signifying the selling that is kicking in at higher levels.
Which would suggest that despite the current dose of positivity in the markets, the underlying weakness continues to persist and will for some time.
Some 47 out of 50 constituent stocks of the Nifty50 ending in the green, led by ONGC, BEL, BPCL, and Shriram Finance, with gains of up to 5.48 per cent, Business Standard pointed out.
The Nifty Smallcap100 and Nifty Midcap100 indices were also higher by 2.03 per cent and 1.61 per cent, respectively.
It is not clear to me how much can change on ground given that it is the same Government that has returned to power in Maharashtra although with some changes in configuration.
Brokerages like Motilal Oswal feel this verdict will strengthen the ‘BRAND MODI’ after a small setback in the Lok Sabha 2024 elections.
They also expect the government to focus on spending and also expect a modest recovery in corporate earnings in the second half of fiscal 2024-25 (H2-FY25).
I am a little doubtful that an election result will do all this economically speaking that is but lets see.
Motilal says, in Business Standard that valuations, especially for large-caps, are quite reasonable now at 19.3x FY26E EPS.
Mid-and small-caps are still trading at expensive valuations, with NSE Midcap 100/NSE Small-cap 100 trading at a price-earnings (P/E) of around 30x / 23x.
A few other brokerages have put out similar reports, including alluding to the fact that the correction has already happened and essentially it is time to dive in.
A lot of that will hinge on how and whether consumption picks up and that is something we have to wait for more data to come in.
Kotak Institutional Equities, usually the more balanced of most brokerages, has said that Indian equity markets will get a short-term boost in sentiment, which may arrest the ongoing correction in the broader markets.
As such, retail flows, which have been the bedrock of post-Covid Indian markets, may continue to remain supportive.
Valuations of the broader Indian market continue to remain at elevated levels, notwithstanding the recent derating in headline indices. Markets may continue to be tested in the coming weeks, post the likely sentiment-related near-term bump.
Kotak also says that the focus could return to ramping up capex, which is running significantly behind targets and finishing the plethora of ongoing projects.
Other brokerages like Emkay Global have pointed out the pressure on state finances thanks to the increased public spending commitments including benefits being handed out.
Rupee And Gold
Some good news on the rupee after a while.
The Indian rupee logged its strongest one-day gain since June on Monday, aided by dollar inflows related to the rebalancing of MSCI's global equity indexes, alongside softness in the dollar and lower U.S. bond yields.
The rupee closed at 84.2875 against the U.S. dollar, up 0.2% from its previous close, its biggest single-day gain since June 3.
The currency rose to 84.2550 during the session, its highest since Nov 7.
Interestingly, the dollar is a little weaker than in the last few weeks.
The dollar index and Treasury yields kicked off Asia trading on the backfoot as markets reacted to U.S. President-elect Donald Trump's nomination of investor Scott Bessent for the post of Treasury secretary.
Bessent, who has spent his career in finance, is seen as a comforting choice for markets and expected to keep a steady hand on government finances.
The dollar index was last quoted at 106.8, down 0.5% from its closing level on Friday. U.S. Treasury yields were lower with the 10-year yield down 7 basis points at 4.34%.
Meanwhile, along with the dollar, gold prices have fallen too.
Gold prices declined 1% on Monday as investors booked profits following a five-session rally to a three-week high.
Meanwhile the announcement of fund manager Scott Bessent as the new U.S. Treasury Secretary by the incoming Donald Trump administration slowed down safe-haven buying, Reuters reported.
The reason is markets feel Scott Bessent is less negative for a trade war.
And since gold is a safe investment during economic and political risks, those risks may be lesser because the markets believe Bessent understands markets and his appointment could reduce the chance of severe tariffs on U.S. trade partners.
Let's see though.
Meanwhile, spot gold was down 1% at $2,686.73 per ounce as of 1147 GMT, after declining 2% earlier in the session. U.S. gold futures shed 0.9% to $2,688.40.
Retail Trends
We spoke of consumption and Mumbai based Elara Securities has just released a report alongside a conference focussed on consumption behaviour and spending, notably in the recent festive season.
Elara Securities Sr VP Karan Taurani tells me that there the big trend is that fast fashion which in turn includes value brands like StyleBazaar are doing well in malls even as grocery brands are pulling back, this includes the big names like Reliance.
In general, beauty, wellness and D2C are emerging verticals for malls.
The McDonalds and Dominos are fighting with newer brands who are scoring on delivery-based solutions and similarly for modern trade versus quick commerce.
This does not mean there are some massive consumption boosts, just that the nature of consumption is shifting rapidly.
I asked Karan to talk about the shifts from grocery into fast fashion and what was driving that..
INTERVIEW TRANSCRIPT
Karan Taurani: Yes, so I think if you look at malls, you know, clearly the larger stores, you know, are the grocery stores. Now I think that segment is seeing some bit of pressure from the quick commerce side and it's also seeing pressure in terms of the large conglomerates wanting to scale down their operations in terms of rationalisation of stores as well. So quick commerce, e-commerce, somewhere in terms of grocery is impacting the traditional sales and if you look at the overall pie as a whole, quick commerce, e-commerce is about 10-12% contribution in terms of the broader FMCG sales.
So they are growing at a faster pace and modern trade players have started to feel the pinch of that. So there is some impact there in terms of, you know, the malls, you know, kind of not being able to have multiple stores which are grocery nature, large store, grocery formats are kind of reducing their store size or shutting down and, you know, what's replicating over there rather what's displacing them or replacing them in those same malls or same areas is the fast fashion segment wherein the fast fashion players are seeing very strong offtake within the India fashion market. This clearly appears to the Gen Z, you know, the price is, you know, very value-centric, the experience is good, the quality of products are very good at that reasonable price point. So that's one segment which is actually driving or, you know, safeguarding mall footfalls which is seeing a negative impact because of grocery and the food business and even cinema to a certain extent.
Govindraj Ethiraj: Okay, I'll come back to that in a second. Tell us about the festival season. What are the key takeaways?
I mean, what was the final analysis? I mean, did finally things go up or were they the same as last year or down?
Karan Taurani: So if you take this on a selective basis, there have been only selective categories which have seen traction. So clearly the FMCG category, you know, is going to see a struggle in the festive season primarily because of the grocery part which I mentioned, the modern trade. A lot of B2C brands have come up, a lot of competitive intensity increasing as far as the urban market is concerned and that is somewhere impacting the overall advertising spends also because FMCG is a large vertical for advertising as well.
So it's a double whammy effect there. If you look at the segment, for example, in terms of the fast fashion side, there the growth has been strong, will continue to maintain. You know, even in terms of the overall fashion industry, I think because of the wedding season, during elections, you know, the wedding seasons kind of got postponed towards October, November, December.
We didn't have too many weddings in the month of April, May, you know, during that time because of elections.
Govindraj Ethiraj: So you're saying people held back weddings because of elections?
Karan Taurani: Yes, a lot of weddings were held back that time around. So you're going to see more weddings in the October, November, December quarter. And because of the overall fashion industry, we'll see a lot of respite.
The third segment, if you see in terms of cinemas, I think the occupancy levels have been quite mixed. Diwali releases have been fairly good, but you know, in terms of broader numbers, it's been 25-30% lower versus the trade estimate. So there are some concerns there, but yeah, December could see respite because of cinemas, because of Pushpa 2, which is a very large blockbuster south-based release.
So these are the mixed signals which you are getting across various categories. Now let's come to the food category. Over there also trends are quite interesting.
I think all the players are seeing, you know, SHG growth to be in the flattish or the declining trajectory, clearly because there is heavy competitive intensity there. A lot of the large global QSR chains are actually struggling for growth because they've got a higher exposure towards dine-in and dine-in share is being eaten away by the smaller QSR chains. So it's only the jubilant of the world which have got a high exposure towards delivery are the ones who are doing well selectively because of higher delivery exposure loyalty programmes and the feed labour initiative that they started recently.
Govindraj Ethiraj: Sales of companies like Levers and Nestle have slowed down, including in the last quarter. So whatever is happening below is more a shifting of the manner of purchase rather than the purchase itself.
Karan Taurani: Yes, absolutely. So there are two things you have to record for. One is, of course, the manner of purchase, which is happening in terms of the things going from, you know, online side, from a traditional side to the online side.
Second thing which is happening is that online gives a lot of exposure to D2C brands and, you know, D2C brands get this entire advantage in terms of distribution going directly to the customer. So the fragmentation is happening on the market side from that as well. And the third very important factor is also the general slowdown in terms of consumption and income levels.
So that's impacting the urban slowdown. Exactly.
Govindraj Ethiraj: When you say general slowdown in terms of income levels, are you saying that incomes are slowing down or lower? I mean, are you using some data point for this or this is because you're seeing consumption slowdown?
Karan Taurani: So broadly in terms of the urban areas, what we've seen is that, you know, as per whatever checks that we did during this conference, that clearly the slowdown is happening in terms of people not wanting to spend more. So, you know, in terms of the FMCG category or in terms of the food category, the wallets have kind of, you know, kind of plateaued now in terms of spending. Rural is obviously more better and more higher and more stronger, primarily because of the initiatives after elections and, you know, whatever the welfare schemes that we have pushed.
Urban is somewhere seeing some kind of plateauing impact. But yes, the premium audience in urban remains to be rock solid. But again, the contribution of the premium audience, you know, would be not more than 15-20% as per our assessment.
So that's the exact story.
Govindraj Ethiraj: Right. So if people are not spending more, do you feel there is also some kind of fatigue in buying and maybe people who were buying maybe more things than they wanted to or consuming more than they wanted to are now slowing down? Or is there something else which is reducing the propensity to spend?
Karan Taurani: As I told you, the big displacement factor is G2C brands, right? So every market, every segment is seeing fragmentation. More than the fragmentation, it has also the customer willingness to kind of, you know, move away from brand loyalty.
So what we've seen in the past, like, you know, consumers have always been loyal to a Domino's pizza, to a McDonald's burger, right? All those things are kind of moving away. I think similarly, the premium FMCG business as well.
If you look at the hair oil category, if you look at the food category, if you look at the stables category, a lot of displacement is happening. I think quick commerce is also partially responsible for breaking this loyalty away from the customers. So this is a clear impact in terms of why the larger brands are not able to grow beyond a certain point or are struggling for growth rather.
Govindraj Ethiraj: So if you take, let's say, the large, well-known brands, you talked about burgers, for example. So let's say you take McDonald's Burger King as the traditional or the older big brands. And then you have, as we've spoken before, a whole slew of domestic brands, which in turn have become quite big in some regions.
So my question really is, and that's the last question, is the overall pie growing or where is it right now?
Karan Taurani: So the overall pie is definitely growing. It's growing more in favour of the organised players. You know, it's growing double digit, anywhere between 12 to 15 percent.
It's growing because of two factors. Because of, you know, store additions by existing larger QSR chains and, you know, very rapid expansion by smaller QSR chains on a very small base. And also because of some bit of SSG by selective small QSR chains which are there.
So the overall pie is also growing and the pie which is growing is also seeing displacement in terms of market share. Because the entire market is moving towards value-centric offers, promotions, schemes, no end, you know, the prices have been cut by the smaller chains, which have got support of PE funding and so on and so forth. So clearly the market is seeing pressure in terms of pricing, which is tenting, you know, the growth rates for the larger chains, which are not able to maintain market share because of high base.
Govindraj Ethiraj: Karan, thank you so much for joining me.
Karan Taurani: Thanks.
S&P Downward Estimates
S&P Global Ratings on Monday revised down its estimate for India's economic growth in the next two financial years as high interest rate and lower fiscal impulse temper urban demand, Business Standard reported.
In an update to its economic forecast for Asia-Pacific economies after US election results, the rating agency projected a 6.7 per cent GDP growth rate in 2025-26 financial year (April 2025 to March 2026) and 6.8 per cent in the following fiscal year, down from 6.9 per cent and 7 per cent, respectively in previous projections.
For FY25, S&P Global pegged GDP growth rate at 6.8 per cent.
"In India we see GDP growth easing to 6.8 per cent this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter," it said.
S&P retained its growth projection for China at 4.8 per cent in 2024 but cut next year's forecast to 4.1 per cent from 4.3 per cent earlier and to 3.8 per cent in 2026 from the previous estimate of 4.5 per cent.
Meanwhile,
A Reuters poll says India's economy likely grew at its slowest pace in one-and-a-half years in the three months to end-September as weak consumption offset a strong recovery in government spending, which for years has helped drive growth, a Reuters poll found.
Asia's third-largest economy grew more than 8.0% in the fiscal year to end-March but has since slowed sharply as skyrocketing food inflation drives up the cost of living and forces households to cut spending.
IPL
The Indian Premier League (IPL) 2025 mega auction is being held in Jeddah, Saudi Arabia this year and is already making waves for the record sums being offered.
The matches will start in March 2025.
The auctions are held every three years and this allows teams to refresh their players.
There are 10 IPL teams who will fill a total of 204 slots, including 70 for foreign players.
They will have a choice of 577 cricketers, 367 Indians and 210 overseas players, to pick from.
The minimum base price of a player at the IPL 2025 mega auction is ₹30 lakh while the maximum base price is ₹2 crore.
Lucknow Super Giants acquired Rishabh Pant for ₹27 crore at the IPL 2025 auction, making him the most expensive player in IPL history to date.
Earlier, Punjab Kings shelled out ₹26.75 crore for Shreyas Iyer, which saw him hold the record briefly.
I reached out to noted cricket and sports writer and commentator Ayaz Memon and began by asking him what stood out in this time’s IPL season auctions and what they signified when it came to the matches next year.
INTERVIEW TRANSCRIPT
Ayaz Memon: A couple of things, Govind, just to set the kind of stage for the discussion. One is that the purse has gone up. You know, now there's more money to spend in purchasing talent for the IPL franchise owners.
So that's why you're seeing these figures, 27 crore and 26 crore and 25 crore and so on. Last year, in fact, for 25 crore, there was almost like, you know, people collapsed in disbelief when Mitchell Stark got that kind of a purse. But this time it's, everybody knew Rishabh would go for plenty, but nobody was sure for how many or how much.
So 27 crore, I think this is actually, you know, setting a benchmark, which may not last too long, you know, because all the franchise owners are pushing for a higher purse from the IPL organising committee and saying that, listen, you know, it's just got more competitive, there's more money available, so to speak, in the market. So therefore, talent is not easily available and we want more money. So that's for the future.
But what is emerging now is, the value is highest for all-rounders. When I say all-rounders, I mean, players who bat and bowl, but also players who keep wickets in bat. So for instance, Rishabh Pant or a Josh Butler or Kishan Kishan, all these guys.
And then add to that, if you happen to be an Indian, an all-rounder who's an Indian, then your value goes even further up because you have to play seven Indians and you're playing 11. So if you take more foreigners, then you're obviously going to have to bung in a few Indians who may not be of great merit. And the third kind of factor which raises the value of a player is the star quality, like a Rishabh Pant has or a Virat Kohli would have or, you know, which is a bit of an anomaly because some of the really high guys who got very fancy prizes this time are not really mega stars in the Indian context either, like Venkatesh Iyer for KKR, who went for plenty, or Arshadip Singh, who went for 18 crore each, which is also a very good price, not anticipated at all. Right.
Govindraj Ethiraj: So what's the overall purse, as you call it, looking like? I mean, does it mean that, let's say the entire pie, which includes all the money that's going to come in from advertisers, is growing substantially into 2025?
Ayaz Memon: I mean, that's the hope. Ultimately, we all know that the IPL's financial health depends on the state of the economy, how much it can grow, how fast it can grow. And therefore, it impacts everything else, including the sponsorship that will come in, the value of the sponsorship, the value of the broadcast rights, and all of that then lead to what is available to the franchise owners to go out and buy the players when the auctions come.
The business model of the IPL is that, I think, every franchise is getting approximately 260 crore a year. So you can spend very little, but you may not be competitive in terms of having talent at your disposal or resources. So I think what is emerging now is 100 plus crore, I think it's about 110 crore that is the purse now, is where franchise owners feel that there's still scope for improvement because players are getting more expensive.
And as you know, IPL has, in fact, because of the IPL, the success of the IPL, a lot more leagues have mushroomed all over the world. So players have to find time to budget their time and also come and play in the IPL. And the best players want to be here, but the best players will then always want the best prices.
Govindraj Ethiraj: So you're saying that 110 crores is roughly what each team spends or will spend? That is the max. That's the cap.
You can't spend more than that as of now. What's the overall, let's say, cricketing calendar looking like for 2025? How does IPL fit in, going back to the point that you also made in terms of time that players have to find for these games?
Ayaz Memon: I think the calendar is pretty packed. I mean, the big event, ICC event coming up next year, there are two actually. One is the Champions Trophy, which has become very contentious because India has said that they will not tour Pakistan, which is going to be the host country.
I mean, they've informed the ICC that they are reluctant or unwilling to go to Pakistan. So that is still hanging fire. The other big ICC event is the World Test Championship final, which will be played mid-year in England at large, which is where India, after the thumping win over Australia today, are back strongly in contention.
They had been pushed into number two position. Australia were number one. Now the pecking order has changed again.
So that's a big event coming up. We've been in two finals, India, and lost both times. So this is, they're hoping to be there in the final for the third time and win that.
But having said that, the IPL has got its own distinct identity and it's a standalone behemoth in the cricketing world.
Govindraj Ethiraj: Right. And it's too early, but any early calls on who are the favourites at this point in the IPL by looking at how the auctions are going?
Ayaz Memon: I think, you see, the auctions are still continuing as we speak. Last two or three rounds are remaining. The unsold players will be sold now.
You might have a few surprises there. The teams I'm fancying actually have done, I think, a good job in the auction so far. I've quite liked Gujarat Titans.
Just to give you an example, they somehow manoeuvred to get Mohammad Siraj and Kagizo Rabada and Rashid Khan and Shubman Gill in their kind of squad, which is very good batting, so to speak, very good bowling, which is very important. And a fairly young team. I think Punjab is also looking good.
They spent a lot of money for Shreyas Iyer to captain them. So KKR have spent a fortune on Venkatesh Iyer, who I think they will ask him to captain too. But somehow Mumbai Indians, look, their residual talent so far, their retentions were fantastic players.
Rohit Sharma, Hardik Pandya, Surya Kumar Yadav, Jasprit Bumrah, who was the hero of India's victory in Australia at Perth, and Tilak Verma and so on. But the one team which has actually kind of surprised me a bit is quite a lot, actually, is Royal Challengers Bangalore, who I don't think, I don't seem to detect any great strategy in their picks so far. So as we speak, I'm not even getting an idea of what their playing level at this point in time would be, apart from the fact that they've got India's biggest cricketing brand in Virat Kohli.
Govindraj Ethiraj: That's a good note to end on. So thank you so much. And of course, we will revisit this in coming days as we come closer to the season.
Ayaz Memon: Thank you. Thanks, Govind.
