On Episode 926 of The Core Report, financial journalist Govindraj Ethiraj talks to Varun Lohchab, Chief Research Officer–Equities at HDFC Securities as well as Aditi Nayar, Chief Economist at ICRA.

SHOW NOTES

(00:00) Stories of the Day

(01:09) The Markets Hold Their Ground Despite Renewed Fighting In West Asia

(04:00) Asian Paints Raises Prices By A Surprising 12% In Sign Of Tail Order Impact

(05:13) The SpaceX Stock Debacle, The Story Behind The Story

(08:01) Retail Inflation Hits 4.8% As Impact Of Fuel Price Hikes, Food Kicks In

(16:05) India's Exports Rose By 15.5 Per Cent To $40.41 Billion In June

(17:55) Earnings Season Has Kicked Off, What Lies In Store?

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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.

Good morning, it's Tuesday the 14th of July and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital undergoing a fairly dry spell now after all those heavy rains, so we are back to waiting for them.

Our top stories and themes…

The stock markets hold their ground despite renewed fighting in West Asia

Asian paints raises prices by a surprising 12% in sign of tail order impact

The SpaceX stock debacle the story behind the story

Retail inflation hits 4.8% as impact of fuel price hikes and food kick in

And then earning season has started off what lies in store

India's exports rose by more than 15% of $40 billion in June.

Markets, Paints and SpaceX

We were predicting a softer muted session on Monday but the markets did better despite concerns over renewed fighting and attacks in West Asia, foreign portfolio investors have brought in over $2 billion in June, there is consensus that they are now returning though with small and measured steps, more than that because of their likely return remember their buying provides the liquidity domestic investors also need, the mood is a little more optimistic and India is back on the radar even if on the outer fringes of it.

In keeping with that sentiment foreign selling in Indian equities is likely over wrote analysts at Goldman Sachs in their July India strategy note reported by Business Standard, sentiment should turn incrementally favourable towards Indian equities due to an improved domestic outlook and ultra-light foreign positioning, they said while renewed geopolitical tensions in West Asia are likely to keep markets choppy, the co-head of Asia macro research and chief Asia-Pacific equity strategist at Goldman Sachs wrote that the nifty index could rise to about 26,500 levels by June 27, implying a 10% upside from current levels, their July view as the report points out is in stark contrast to their stance in May 26 which is two months ago when they saw the risk reward equation as less attractive for Indian equities compared to their North Asian peers, apart from that they did not expect foreign investors to return to Indian shores in a hurry even if oil prices were to decline, so all of that is forgiven even if not forgotten and more on that at least in terms of how portfolio investors from overseas are looking at India from a leading India brokerage in some detail shortly. With all of this as a backdrop the benchmark indices recovered from a near one percent drop on Monday thanks to IT stocks which rose on the back of major deals and earnings offset concerns over renewed fighting in the Middle East, but more importantly and significantly the nifty mid-cap 50 and the nifty small cap 50 indices hit their respective lifetime highs in intraday deals on Monday, so in 26-27 these indices have now gained about 21% and 29% each compared to 8.5 for the nifty 50. On Monday the benchmarks began the day weak and stayed weak and then swung around the sensex closed up 47 points to 77,616 and the nifty 50 was up very slightly four points to 24,211.

In the broader markets the nifty mid-cap and nifty small cap ended 0.01 and 0.03 percent higher but remember they did touch their lifetime highs intraday. The rupee was not so lucky as it slipped to its weakest level in more than a month after oil prices rose after Iran and the United States traded strikes with Tehran saying it had closed the vital state of Hormuz according to a Reuters report which added that the rupee closed at 95 rupees 62 paise down 0.3 percent from its previous close. Meanwhile in a worrying sign that the tail-end effects of oil price spikes thanks to the war are taking effect India's Asian paints has increased prices by about 12 percent to counter what it says are rising raw material costs linked to the Middle East conflict marking the steepest hikes in the industry according to a Reuters report quoting the firm.

So even if there are similar lag and benefits with oil now around 75 to 78 dollars a barrel it is doubtful prices will come down soon or maybe as some sceptical analysts have often pointed out in the past never at all. On Wall Street stock futures fell on Monday with chip makers following international peers sharply lower in pre-market trade even as traders weighed the latest events in the Middle East and also started looking out for a rash of corporate earnings that are out later in the according to a CNBC report which also pointed out that the US listed shares of SK hynix lost eight percent following its Nasdaq debut on Friday when it had soared 13 percent more on falls and rises in a moment. Rent futures were up three percent to about 78 dollars 52 cents on Monday after hitting almost 79 dollars 80 cents or close to 80 dollars.

Now some insights on SpaceX a stock and company almost every active investor wanted a piece of and maybe even managed to get one a few weeks ago now of course it depends on when they got that piece. It's roughly a month since the stock listed and opened at 192 hit 201 the next day and is now at 145. So SpaceX shares have fallen 12 percent last week and are down 36 percent from their peak according to a detailed note from professor Scott Galloway investor and professor at NYU Stern.

But the more interesting story is about the analysts who have backed it. First of all as a backdrop SpaceX officially joined the Nasdaq 100 last week. It qualified under new fast track listing rules which reduced the required trading history from at least three months to just 15 days and eliminated the minimum public float requirement.

Prior to the rule change Nasdaq 100 stocks had had to have a minimum float of 10 percent according to that report from professor Galloway. And more importantly the stock also received a whole bunch of new ratings from Wall Street analysts. And here's where it gets interesting.

Of the 32 analysts covering SpaceX only one published a sell rating and it came from a firm called CFRA research and independent financial intelligence firm with no investment banking asset management or trading arms according to professor Galloway. And then come the projections. Raymond James projected SpaceX would be worth $800 per share in the next 12 to 18 months for which professor Galloway points out the stock would have to increase more than 400 percent and its market capitalisation would have to hit 10.5 trillion dollars equivalent to one third of US GDP and would make it worth more than the stock markets of the UK France and Germany combined.

Professor Galloway also reminds us that analysts bias stock recommendations upward especially if the bank they work for is affiliated with the stock they're analysing something that was quite rampant during the dot-com bubble. And one of the most famous examples is Enron. Just two months before it collapsed 16 of the 17 sell-side analysts covering the stock rated it buy or strong buy and many of them were banks that did business with Enron.

And here's another interesting one. Morgan Stanley's price target for SpaceX is $300. That's double of where the stock price is now.

Remember we just mentioned it was at about $145. Morgan Stanley also writes that their bull case is $600 and their bear case is $75. So they're telling us professor Galloway says it could fall 50 but it could also rise 300.

So basically he says they're not telling us anything. Professor Galloway links all of this to the dot-com bubble in that that there is a structural conflict of interest embedded in equity research. If you assign a company a sell rating then it's unlikely that the company will be interested in working with you to underwrite their IPO through which you would receive your one percent.

So Elon Musk is naturally going to choose the investment banks or chose the investment banks that were nice to him.

What is the Impact of India’s Retail Inflation?

Now back home quite literally retail inflation in India has accelerated to 4.38 percent for June and this crosses the Reserve Bank of India's four percent target for the first time in 17 months and obviously raising the prospect of an interest rate hiking cycle. A Reuters poll of economists had said or rather forecast the inflation level at 4.3 percent and this is also the highest since India revamped its consumer price index in January.

Key interest rates were unchanged in June at 5.2 percent but inflation forecasts were raised to 5.1 percent from 4.6 percent earlier essentially adjusting or acknowledging knock-on impact from supply driven pressures. Food inflation accelerated to 5.32 percent in June from 4.78 percent in May on the back of weak monsoon showers. Given all the price pressures I reached out to Aditi Nayar, chief economist at ICRA Ratings and I began by asking her why the retail inflation rate of 4.38 percent was higher than what had been forecast by several economists around 4.3 percent.

INTERVIEW TRANSCRIPT

Aditi Nayar: The CPI inflation headline number has come in at 4.38% and our forecast was actually 4.3% so it's a little bit higher than what we had expected and broadly when we look at the sequential hardening which has continued for the last few months one of the major reasons of course for the higher print in June is the fact that this is the full month impact of the retail selling price increases for petrol and diesel the second is that food inflation has hardened which was also broadly along expected lines only now we've had a fairly terrible start to the monsoon season this year we had a 40% deficit in rainfall while the deficit has narrowed quite a lot subsequently with a lot of heavy rain that came in at the beginning of July we still have a deficit of around 18% so this is one of the factors that we need to continue to watch out for going forward

Govindraj Ethiraj: so from some other estimates I'm seeing that about 65% of the uptick is because of higher energy prices and food and beverages obviously also went up so my question is as we look ahead oil prices have obviously eased off to about 78 dollars may come down may not so how do things look if you were to project ahead?

Aditi Nayar: see for the next few months definitely we do expect the CPI and station print to continue to harden now even if we have a status quo on the west asia crisis and on the war I don't expect that the retail selling prices of petrol and diesel are going to come down very quickly so they went up a little late after the crude oil prices hardened and now that they've gone up I suspect they'll remain sticky for some time until the OMCs are able to recoup some of the under-recoveries that they made in the early part of Q1 and in March as well crude oil doesn't actually enter the CPI directly so petrol and diesel prices having gone up and now remaining sticky that is more important than the direct trend in crude oil prices for the CPI whereas for the WPI of course food itself has a large weightage so that has a very quick transition which happens to the WPI both on the upside and on the downside but petrol prices and diesel prices will be very sticky so that's something that will now feed through and also the sort of widening in terms of the generalisation into prices of other items the second round effect basically that is also something that we need to wait and see now on the food side the early numbers that we have for July aren't that great for a lot of food items so we do expect a hardening in the food inflation as well and then we have a base effect in the months ahead so that's another reason why we expect that even if prices wouldn't go up very sharply the base effect itself would make inflation look higher and we are expecting the peak to come in in Q3 and then normalisation subsequently so right now we're looking at an average CPI inflation of 4.8% in FY27 but risks are to the upside both from a flaring up of the West Asia crisis and from the monsoon turnout not being very favourable

Govindraj Ethiraj: right and I'm going to come to the interest rate question in a second but is there anything that you saw in the numbers which stood out for you either from a negative or a positive?

Aditi Nayar: See I think you know this is a new series so we're still sort of digesting the numbers we're still getting used to them so a few of the sub-indices were a little higher or a little lower than what we had expected so we're still kind of you know getting our hand around how to project the sub-indices but I think as a whole the number has come in only 8 bps higher than what we had forecast so I would say it's broadly in line with what we had thought

Govindraj Ethiraj: right and therefore as you look ahead and is this sort of the start of a likely interest rate hike cycle or has this set the brace or we still have some leg room?

Aditi Nayar: So let me start by saying that I think rate cuts are off the table in terms of the next action it will probably be a rate hike but when will it happen I'm not sure it's going to come very quickly so August policy we don't expect any rate change to happen or any stance change the easing in crude oil prices I think has bought us some time in terms of not a very quick rate hike now few things that we'll be looking out for what happens with West Asia what does it mean for crude what does it mean for availability of inputs and you know how does that affect the price scenario going ahead like I said our baseline now is that petrol and diesel prices are not going to come down very quickly so that's factored into the baseline but do they need to go up further from where we are right now that's something we need to watch out for second thing with the monsoon so we had a bad June but June is the smallest month for both the volume of rainfall and the volume of sowing July and August are critical July particularly is very important we got a huge amount of rain in the first 10 or days of July and then a lull again has started after that now typically a lull like this should actually be a very good opportunity for sowing to happen so maybe the next week or two suddenly we'll see the sowing numbers catching up to normal quite rapidly hopefully let's see if that happens or not so after that with the El Nino etc etc how does the rest of the monsoon season pan out I think it's just too dynamic right now for us to be able to take a call on the monsoon and in the end do we really see generalisation of inflationary pressures if we do then that will set up the case for a rate hike but August I think is off the table maybe we get a stance change in October and a rate hike in December but if the monsoon is reasonably well distributed from here on out with not too much of a shortfall and we don't really see too much of a generalisation of inflationary pressures maybe it gets pushed out further in terms of the timeline

Govindraj Ethiraj: right you know companies tend to absorb cost rises for a fair period of time because they also anticipate that things could turn so you know for example today Asian paints has announced a 12% increase in their prices which is obviously because of downstream pricing how do you look at these lag effects at this point obviously in the reverse or the downward direction and when do you think we could still continue to see some of this and even if so a reversal later

Aditi Nayar: see my general experience is that definitely companies if they think a shock is temporary they will try to take a margin hit rather than taking a volume hit so that is something that we thought was going to be the case through Q4 and Q1 and it would really depend on how the perception changed about the duration of the crisis so with the ceasefire that happened that would have again reset and made companies think can we hold off can we keep absorbing it things will become better accrual prices will come down now again that uncertainty has restarted but in many sectors you may not find that the price increases happen very fast now typically for manufactured goods when prices go up because commodity prices are higher they can also come down in a quarter or two where prices don't come down very easily is services fees for instance there typically we tend to find that there is a lot more stickiness so once the fee related to a service goes up it doesn't come down very quickly and that again then becomes sort of enmeshed in your CPI trajectory

Govindraj Ethiraj: Got it thank you so much for joining me Aditi

Aditi Nayar: Thank you

How have India’s Exports Risen?

India's exports rose about 15.5 percent to 40.4 billion dollars in June even as the trade deficit widened to about 30.4 billion dollars according to a Reuters report which added that June imports were up 30 percent to about 71 billion dollars and gold imports rose to about 11 billion dollars for the April to June period from about seven and a half billion dollars last year. So gold imports clearly are rising or continue to rise despite the hike in import duties. India's exports to West Asian countries rose to about 7.3 percent to 5 billion dollars in June according to government officials who spoke at a press briefing on the trade data as reported by Reuters which added that they attributed the increase in the country's inbound shipments to higher imports of crude oil electronics machinery and precious metals.

How has India’s Monsoon Fared So far?

Now back to the monsoons India's southwest monsoon has slipped back into a weak phase after a brief spell of widespread rainfall narrowed the seasonal deficit earlier this month with the nationwide rainfall shortfall widening to about 18 percent as of Sunday according to a Times of India report. The recent burst of rain had reduced the cumulative deficit from 40 percent at the end of June to 14 percent by July but as we can see literally looking outside with the rains going away the gains or some of those gains have been reversed. As of July 12th about 15 states including Bihar, Jharkhand, Punjab, Gujarat, Karnataka, Telangana and Andhra had recorded rainfall deficits of 20 percent on more with some shortages ranging up to 73 percent.

East and northeast India are amongst the worst affected reporting a 37 percent rainfall deficit according to the Times of India report.

What are we Expecting this Earnings Season?

Earnings season has kicked off now at least one result of TCS has enthused the market sending the stock among other IT ones up on Monday. HCL tech's first quarter revenue which came Monday evening also beat expectations as financial services clients spent more on technology.

HCL tech which is India's third largest IT services firm posted a 14 percent year-on-year rise in consolidated revenue in the April to June quarter according to a Reuters report. Now what's the overall sense of Q1 results now that they're coming out looking back and then looking ahead at Q2 as well moreover how are valuations looking and that important question how are foreign portfolio investors looking at India right now. I spoke with Varun Locha, Chief Research Officer Equities at HDFC Securities the brokerage and I began by asking him how the Q1 season or what kind of signals the Q1 season was sending out.

INTERVIEW TRANSCRIPT

Varun Lohchab: See, obviously, earning season has just started, you know, only two or three of the large names have reported so far, but when we did our previews sector by sector and at aggregate level, we did write about it that Q1 was looking like a fairly decent quarter in the context of what happened from a geopolitical point of view, you know, the disruption which was caused. But in that context, I think the domestic economy has been surprisingly resilient, so when we spoke to, you know, a lot of the managements, the demand conditions were quite strong. In fact, you know, across automobiles, even consumption saw some uptake, the credit growth for banks and NBFCs.

So, and a lot of the other high frequency indicators also indicated to us that the demand side was not an issue in this quarter. In fact, it held up slightly better than what we thought, you know, it would given the uncertainty, even real estate sales for that matter, you know, the pre-sales. That's a positive that on the top line side, you will see strong numbers and then even the inflation effect, the positive effect in terms of the higher nominal growth, which leads to higher revenue growth for the companies that will also be reflected in this quarter.

So, this quarter, you know, that the revenue growth for our aggregate coverage universe is going to be around 15 to 16%, which is the highest in last, you know, seven to eight quarters. Even we are moving out of the deflation or, you know, low inflation period to a higher inflation period. So, that helps from a top line perspective.

Like even for FMCG firms, where the top line growth was more like mid single digits will now be close to double digits just because of slightly better volume growth, but more than that three to 4% positive price impact as well. You know, coming back to the aggregate earnings for the corporate India, then when we go from revenue to bottom line, obviously there'll be some margin compression. So, the underlying growth is going to be around 12 to 13% for our coverage universe.

Now, if I take out the oil marketing companies, because that is the actually the single most largest drag in this quarter, you know, apart from that, almost everything else is growing in double digits. So, it's also fairly broad based kind of a growth, which was quite heartening to see. It's not that one sector alone is pulling it up.

In fact, one sector is bringing it down, which is oil and gas, but most of the other sectors are growing in double digits. So, that's the overall sort of expectation from earnings season. It's going to be a reasonable one.

Management commentaries will also be quite okay, given the fact that even they have been slightly positively surprised with the demand resilience. And we will believe in July, the momentum would continue from the domestic demand side.

Govindraj Ethiraj: So, what's your sense on why or how the demand trends are looking strong in as much as from consumer behaviour understanding point of view, and whether that's giving us any indication of how things might be for the next quarter?

Varun Lohchab: So, see, there are a few things, you know, which is causing this. If you look at from impact of the war perspective, frankly, most of the hit was taken by the macro, which is the government absorbed a lot of the hit. And, you know, the price hike or the fuel price hike was fairly limited and active towards the end of the quarter.

This fuel price hike of around 10% odd, which happened was after a long gap, you know, several years, the fuel prices were stable. And therefore, you know, it did not hit the consumer as much. Actually, most of the other hit was through currency, you know, so basically, the hits were more on the fiscal side and on the macro indicators rather than the micros.

And therefore, even the price hikes, which have happened now in some sectors have been received well by consumer because they are coming one after a period of low inflation. So, that gave, you know, that better sort of absorption capacity from a consumer point of view to take some of these price hikes. Plus, there was a GST cut, if you remember, a fairly sharp one, which led to savings for consumer.

So, you know, in that sense, you are just taking back some of that savings, which had happened. I think the key point I am trying to drive is the consumer is not feeling the pinch so much of the inflation, which has happened because of the war. And therefore, if you see the demand conditions on the consumer side have been improving over the last six months gradually ever since the GST rate cuts have happened, like automobile demand has been strong since then.

Real estate was anyway not part of that GST cut thing, but real estate pre-sales have been fairly steady and strong over the last few years. And we are seeing now even staples and some of the other, you know, indicators sort of shaping up well from a demand perspective. Even monsoons, you know, I am just pre-empting one of the key questions which everybody has on, you know, how much of a worry is monsoon going to be?

Obviously, you know, it still does impact the rural side demand, you know, a weak monsoon. But we had done an analysis earlier and what we had found out was that rural demand typically does not get impacted so much by just one bad monsoon, you know. And because we had two reasonably good monsoons in the prior year, even one below par and, you know, weak monsoon will not derail the rural consumption story so much.

Historically, what we saw is that when there are two consecutive bad monsoons, then the impact is quite severe. But one bad monsoon after two or three good years of monsoon typically does not derail the rural consumption as much.

Govindraj Ethiraj: Right. And again, looking ahead, since you're saying that most of what we are seeing right now has been in a way anticipated, two questions. So one is what's the sense on Q2 given what you're hearing now?

And you did say that momentum seems to be strong. Second is, was IT a surprise? And I saw somewhere that you also changed your view on it.

Varun Lohchab: If you look at TCS earnings, they were not as bad as what the fear was, you know. In fact, they grew on a Q1Q basis by 0.5% after three quarters of, you know, slight decline, which was there. If you look at the TCB, you know, the new deal wins and everything.

Most of the other underlying indicators also were not pointing to anything dramatic happening, you know, which was the fear. So I think IT earnings were never expected to be very strong this quarter or even this entire year, the impact of deflation due to AI is going to remain. But, you know, are we going to see these companies declining or, you know, their revenues falling this year?

Our view was that that won't be the case. And that seems to be, will get reflected in Q1 results of most of the IT companies where they'll still see a YOY growth in dollar terms. And in rupee terms, it's even better because there has been a fairly sharp rupee depreciation.

And, you know, FY28 will be a better year after absorbing this AI deflation impact through FY27. So I think we have increased our weight in the model portfolio for IT sector in the last two or three months. In fact, post-March, we turned neutral.

We were running an underweight on IT for last two, two and a half years, even very stressed valuations relative to growth. While growth has not improved for sure, but valuations have corrected a lot. And therefore, now from a risk reward perspective, we see IT as a reasonably good sector to be in.

Again, not a huge overweight for us as of now, but we are slightly neutral to very modest sort of an overweight in our model portfolio. And what are you overweight on then? See, in terms of key overweights, consumer discretionary, we are overweight.

Real estate, we are overweight. Automobiles, we are slightly overweight. Financials being a large sector, we are only very mildly underweight, which means, you know, from an absolute perspective, that is, you know, we are holding almost 28 to 30% of financials in our model portfolio.

So it is the largest single sector. And we see that sector being fairly, again, attractive in terms of risk reward. Valuations are not too high.

And out there, even numbers are still holding up quite strong. Even this quarter, the credit growth is good. Credit cost is very low.

Still, you know, there is no negative impact for most of the NBFCs or banks from this geopolitical crisis on the NPAs. So financials remain still a good sector. Metals, we have turned underweight.

Cement, we are underweight. Pharma is another sector where we are slightly overweight. Pharma and healthcare combined.

Govindraj Ethiraj: Right. So, I mean, I'm sort of trying to extend all of this into Q2 or onwards as well. So you're positive on real estate but underweight on cement.

Yeah. And is that a dichotomy or is that linear? Not really.

Varun Lohchab: Real estate is only one of the demand side factors for cement companies. And, you know, there are other sectors as well. Having said that, I think cement volume growth, we are not so negative.

We believe the volume growth is going to be decent this year. But, you know, pricing power is still missing in cement sector. And therefore, they will not be able to fully absorb the cost hike which is coming through.

So therefore, there will be some margin erosion. And valuations in cement are still on the higher side, especially for the large caps. So there are some select mid caps which are looking reasonably okay to us.

But large caps are still expensive in the cement sector. And therefore, it becomes underweight from that perspective. And coming back to your Q2 thing, I think numbers will look better at an aggregate earnings level from Q2.

So this quarter, as I said, we are going to see around 10 to 12% kind of earning growth for our coverage universe x OMCs. I think this number will move to 14 to 15% from Q2. From the rest of the three quarters, we expect close to 14 to 15% kind of earning growth for our coverage universe.

Govindraj Ethiraj: Right. So we've seem to be seeing the return of foreign portfolio investors maybe about $2 billion give or take this month so far. So I don't know whether you're seeing that as a secular trend or not.

But how are you seeing the other factors playing or influencing the market, particularly in terms of prices and volumes and so on?

Varun Lohchab: We are not so sure it's a very secular trend that they would be pouring in a lot of money into India. But having said that, we have been of the view again, last one or two months back itself, saying that probably the worst of the FPI selling is over or getting over the pace of FPI selling. And a lot of it was again, sitting here, we feel it's India specific.

But if you look at first half of this calendar year, the emerging market selling has been very, very high by FPI. And in fact, while India also had a fairly sort of high amount of FPI selling, but some other markets had even, you know, sort of higher FPI selling.

Govindraj Ethiraj: Including South Korea.

Varun Lohchab: Yeah, South Korea in particular, even Taiwan also to an extent. So this was more of an emerging market thing rather than just India alone. But having said that, India's earning growth was lagging and will continue to lag some of the other emerging market peers over next, you know, I think six to nine months.

In Korea, the FPI selling is continuing into July. But in India, we have seen that ebbing because there is a slight positive number because of some money shifting away, you know, some from AI trade to anti-AI, which is India. But we don't see, you know, India's valuation or growth outperformance right now to other markets is not so strong that we will see a significant inflows of FPIs.

That is our current view. But, you know, you might have up to $3 billion positive number this month, and then maybe another, it could be minus $2 billion next month. But we believe we are not going to see a very meaningful $8-10 billion plus or minus number in the near future from FPI.

Govindraj Ethiraj: And I'm sure you're talking to a lot of foreign portfolio investors. Are you sensing a mood shift at all? Because I mean, a few months ago, it was about they don't even care about India, they don't respond to calls and so on.

Varun Lohchab: No, I think we are seeing a greater interest for sure. And I think it had started happening while from FPI selling number, it is getting reflected only this order. But since March, April, we have been seeing on a stock specific basis and generally the enquiries from FPIs increasing.

And especially from the ones who have tracked India for long, because they know that there is inherently things are still on the right path. And you know, there is no big underlying issue. The issue was always valuations in India.

In the last two, three years, whenever we spoke to FPI, even though they liked a lot of the stocks, valuation was keeping them on the sidelines. Having said that, even today, you know, valuations, I would say still remains a key concern for them into not getting into India in a big way. But we are seeing a lot more interest.

The good thing is India's weight in emerging market index has now fallen to a level, you know, which is close to 10%. And from there on, most of the emerging market investors believe that, you know, this number will probably now again start trending up over the next few years. So therefore, they are actively looking for ideas where they can deploy money.

But, you know, so they're doing more homework for sure. We have not seen this level of interest in the last two to three years. But are they jumping in in a big way saying that India has become dirt cheap or it is too attractive?

That is also not the case. But getting more constructive, definitely, FPIs as well.

Govindraj Ethiraj: Right. That's a good note to end on, Varun. Thank you so much for joining me.

Varun Lohchab: Thanks for having me.

What is the Latest Update on Europe’s Heatwave Imapct?

European countries have reported more than 10,000 excess deaths during the record-breaking heat wave that engulfed the west of the continent in late June according to official data quoted by Reuters. The vast majority more than 9,000 were among people aged 65 and above according to data published by Euromomo a network backed by the European Centre for Disease Prevention and Control and the World Health Organisation. Leading physicians told Reuters that it is difficult to explain this high excess mortality by anything but the extreme heat.

Scientists have also said that this heat wave would have been virtually impossible without human-caused climate change which is making heat waves more frequent and intense. The data pulled from national mortality statistics in 27 European countries included excess deaths from all causes not just heat-related ones during the week from June 22nd to 28th when the heat wave peaked in France, Spain, Britain and other countries. One of the takeaways for us I guess is the rapid turnaround of data itself which obviously is useful in policy responses particularly when in this case heat waves are spreading across the country.