On Episode 923 of The Core Report, financial journalist Govindraj Ethiraj talks to Tejashree Joshi, Head - Environmental Sustainability at Godrej Enterprises Group as well as G Chokkalingam, Founder of Equinomics Research.

SHOW NOTES

(00:00) Stories of the Day

(00:50) What Signals Are The Markets Really Looking For?

(03:46) How India Inc Revenue Grew 11% + In The Latest Quarter And What Drove It?

(06:08) India To Prepare For Peak Demand Of 300 GW Next Year, From Around 270 GW This Year

(08:16) Extended Discussion on Market Signals with G Chokkalingam

(15:26) How Are Manufacturers Responding To Extreme Climate Situations, From Heatwaves To Heavy Rainfall

Check out our power tracker https://cleanpower.thecore.in/

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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 Friday, the 10th of July and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes…

What signals are the markets really looking for?

How India Inc.'s revenue grew 11% plus in the latest quarter and what drove it?

How are manufacturers responding to extreme climate situations from heat waves to now heavy rainfall?

And India to prepare for peak demand of 300 gigawatts of power next year from about 270 this year.

Markets, Q1, Power Demand and Signals

So the key question in the markets right now is what are they giving more prominence to? Is it the monsoons that appear to be doing better right now after a disappointing start though that could change again? The war in West Asia which looked like it was going to go back into a full-blown mode just 48 hours ago but may have cooled off a little bit right now.

And we're saying that because Brent crude futures were down 11 cents to about $77.91, so under $78 a day after they were looking like heading towards and crossing the $80 mark quite easily. Though traffic through the state of Hormuz has come to a near standstill on Thursday after the U.S. struck it down for a second straight day as the truce looked increasingly shaky according to Bloomberg which added that observable movements largely occurred along an unapproved route nearer to the waterways north while the U.S. supported Omani corridor was quiet. This was based on ship data.

So what do analysts expect to happen? Well on the monsoons we can't say but on U.S. President Donald Trump apparently you can lay down a few more bets on what he could do next or more appropriately not do. We'll have more on that in a moment not on Trump or on what the markets are expecting but before that the monsoons. The good news is that the southwest monsoon has covered the whole country on Thursday 35 days after it touched Kerala.

The last time it took that long was in 2021 when it took 40 days to cover the country. Now looking ahead the next fortnight is expected to see below average rainfall to the country's western and southern regions potentially slowing the sowing of cotton, soya beans and corn according to weather officials who spoke to Reuters. According to them the Madden-Julian Oscillation or MJO is unlikely to be favourable over the next fortnight and the chances of any low pressure system developing during this period are also low.

As a result the weather department or the India Meteorological Department officials told Reuters Maharashtra, Karnataka, Telangana, Andhra Pradesh and Kerala could receive below average rainfall and by the way heavy rain during the first eight days of July something that many of us have experienced particularly along the west coast shrank the country's rainfall deficit to 15 however it could widen again in coming days as the monsoon takes a break according to another weather department official. With all this as a backdrop the Sensex rose about 238 points to close at 76,741 and the Nifty 50 was up 80 points to close at 23,962. The broader markets were up too with the Nifty mid-cap and small cap ending about 1.38 and 1.8 percent higher.

India's consumer inflation has mostly crossed the Reserve Bank of India's medium-term target of four percent in June for the first time in 16 months according to a Reuters poll thanks to higher food and fuel prices, the war and a weak monsoon. Consumer inflation measured by the annual change in the consumer price index is expected to have risen to 4.3 percent for June from 3.93 percent in May according to that poll which spoke to 37 economists and was conducted between the 3rd and the 9th of July. So how has the first quarter been which is the first quarter that just went by for companies? Now a report from Crisil Intelligence says that corporate revenues are estimated to have grown 11 to 11.5 percent in that first quarter ending June 30, 2026 which is the fastest pace in two years despite the supply disruptions and increase in input costs caused by the West Asia conflict and that compares with a revenue growth of 9.6 percent in the preceding quarter according to that report which also says that while growing uncertainties around crude oil and gas both prices and supply pushed up fuel freight packaging and feedstock costs and tested corporate profitability domestic demand actually held up reasonably well helping companies in many sectors pass on the burden to end consumers.

This analysis is based on more than 400 companies across 47 sectors and represents nearly half of India's listed market capitalisation. On the other hand profit margins did fall or likely fell by about 75 to 100 basis points as companies faced higher fuel freight and raw material costs. So the big change of course is that prices are doing more of the work as opposed to previous two years when revenue growth was powered more by volume.

This time around pricing contributed to revenue growth as opposed to volume that is in sectors like aluminium, steel, cement, airlines, fertilisers and gems and jewellery and airlines are a particularly good example because that's something that we've all felt. Revenue is estimated to have increased 18 to 20 percent even though volume that is volume of passengers flying fell by three to five percent and fares had risen anywhere between 23 to 25 percent thanks also to higher aviation turbine fuel costs. Among some of the major results just coming in TCS has reported a net profit of about 13,000 crores up 4.6 percent from the first quarter of 25-26.

Revenue grew about 14 percent and sequentially the firm's revenue is up 2.2 percent. In constant currency terms revenue was up 0.4 percent so there is obviously a dollar or a rupee depreciation benefit here. Compared to Bloomberg estimates the company's performance was a beat on revenue growth and a marginal miss on profit and revenue was expected at about 71,800 crores and net profit of 13,394 crores.

Among sectors that are likely to continue to do well this year amongst many others of course power is one of them something that we've been talking about a lot on the core report. India will need to prepare for peak power demand of about 300 gigawatts next year. India's power minister said on Wednesday evening while urging faster development of domestic clean energy supply chains India has already met a record peak demand of about 271 gigawatts and could rise to between 276 to 280 gigawatts this year before approaching 300 gigawatts next year the power minister said at the India energy storage week in a report on Reuters.

You can also track how India's power consumption is moving on a real-time basis by going to cleanpower.thecore.in that's our website of course that's the core.in and the section is cleanpower.thecore.in so you could actually see how much contribution each category of power is making and particularly what I found interesting is how in the daytime clean power is contributing to almost 50 percent of total power consumption and as the evening sets in that number keeps coming down. As conventional power generation goes up and solar power for instance backs down. And gold prices which we've not touched for a while are still soft relatively of course spot gold is about 4068 dollars per ounce and it fell slightly on Thursday after dropping to its lowest level since July 1st on Wednesday.

Analysts told Reuters that the catalyst that is supporting this trend that is to the downside for gold is a repricing of the second interest rate hike by the federal reserve to come in as early as Q1 next year. Elsewhere after a decade of negotiations Australia has agreed to sell uranium to India for power generation in a deal being termed as landmark and signed between the two nations during a visit to Melbourne by India's Prime Minister Narendra Modi. India will purchase uranium for exclusively peaceful purposes the government said in a statement on Thursday and the statement of course did not provide details on how much uranium oxide or yellow cake India would purchase or over what time frame.

To return to market so what are the underlying strengths or weaknesses which could determine where it could go in coming days I reached out to G Chokkalingam founder of Equinomics Research and I began by asking him how he was seeing the underlying strengths or weaknesses that were holding up the market and that could determine where it could go in coming weeks and months.

INTERVIEW TRANSCRIPT

G Chokkalingam: So, first of all, I think the market has recognised a tremendous improvement on the rainfall. I have not seen this kind of volatility in the rainfall also in the last 20-30 years. You know, at the end of June, the cumulative rainfall deficit was 42%.

It will be surprising as we are speaking now, the cumulative rainfall deficit has come down to just 15% in a matter of 8-9 days. And number of subdivisions receiving normal or excess rainfall is now 74%. It was reversed.

In June, two-thirds of the subdivisions failed to get normal rainfall. Now, three-fourths of the subdivisions have got a normal to excess rainfall. So, this is a remarkable change and this is addressing the concern on inflation and all that, you know.

So, that is one. Second, market reacted to Trump, you know, the statement and attack in a big way yesterday. But I would attribute not everything to Mr. Trump's statement. Because the small cap index recovered 25% in three months. A lot of small caps suddenly rose 20-50%. You know, the profit booking was waiting to happen.

So, his statement made some nervousness and people used this to book the profits. So, that is why yesterday, sensation nifty fell more than 2%. So, definitely it is not exclusively for Trump's statement.

I can say this confidently because he is known for reversing his statements frequently. Either you take a tariff war or you take Iran war. So, the market doesn't believe that he is going to stick to his words and, you know, the war is going to last for long.

So, that is why the market was quite steady today also. And it is going to be steady. I am pretty confident the world cannot afford to have a war.

All the 35 countries which applied pressures last time for stopping the war, they will be active in case the war continues. So, other strong points for the market, you know, the valuations have come down below 21 PE, trading PE, you know, 5-year high is around 24. Oil price has crashed, 40% it crashed.

Even after this renewed attack, oil price is still down 35% from post-Iran war peak price. And gold price also down more than 20%. So, these two will definitely strengthen your external balance and that is a key for attracting back FEI investments.

And FEIs also, they have moderated their selling in the recent days. And then apart from these, what are the trends? You know, the global market has seen, you know, the boom and bust in technology stocks starting from 2000 dotcom bubble.

So, now there is a fear on AI, whether this is also going to be a bubble. Of course, I understand the fact that AI theme has got a lot of potential for growth and profit. But a lot of people accept one thing in common that though the AI is not like 2000 dotcom bubble, it has a credible, you know, prospects for growth and revenue profits.

But everybody assume that or accept that in the long term only the current valuation can be justified by the earnings. Hardly any sizable number of people are expecting current valuation to be justified by immediate short term or medium term earning from these companies. So, that is going to keep giving a lot of uncertainty and fear for the investors investing in these stocks.

That's why we are seeing periodic booking profit and stocks falling. And that volatility will continue. That will be a strengthening point for Indian market because it offers you defensive stock, domestic demand driven by diversified sectors, all that.

Lastly, the DIAs and retail investors have started dominating the domestic market. So, DIAs have exceeded FAI. Now we saw that in terms of inflows also mutual funds exceeding FAI.

And even now 6 to 8 lakh new investors are pouring in. So, outlook looks good. The only three risk factors are, you know, by any chance IPO boom again gets renewed and there is a massive number of issues.

Then that can dry up the liquidity in the secondary market. By any chance I am wrong on my assumption of Trump not opting for long lasting war. Really the war lasts for long.

Then the oil price again will jump. These are the two possible risk factors. Otherwise, we are positioned for further significant recovery in the short term.

Govindraj Ethiraj: So, in the last two days, we've also seen oil prices go up Chokka. And to some extent, the markets do track that. I mean, when oil prices went from 72 to 78 dollars per barrel, the stock price has also fallen.

That's been a consistent pattern in the past. So, you're saying that we are not that much affected by oil price movements now like before?

G Chokkalingam: No, it is still a very key point because it's still connected significantly with the forex reserves, imported inflation, and therefore trade balance and finally on the rupee exchange rate. It's a backbone of India's external economic strength or weakness. It will take another 10 years for reducing the dependence on imported oil because now renewable energy is 19% of the total energy.

So, once that grows to 40-50%, then definitely we'll have a credible improvement and the oil will not dictate our economy and market. I mean the bubble in the oil price. But now it is important.

But the point I'm making is that post-Iran war, the peak price of Brent oil was 118. So, yes, it is very sensitive to what is happening in Iran. It has gone up also in two days.

But still, it is down by about 35% from that 118 dollars per barrel, the peak we saw post-Iran war, which is a really comforting factor. And also, OPEC plus has decided to keep increasing the oil supply. So, as I said, you know, again, the pressure will build up to tone down the attacks by both parties.

And again, the oil will correct. But once the ceasefire lasts for long, I am putting it on record that oil price can fall to even 50 dollars per barrel, Brent oil, because world over, the demand is going down and the supply is increasing. And the oil import intensity in the economic growth is also coming down worldwide.

And renewable energy is taking off in almost all the major economies. So, we will have a very good time. India will be the maximum beneficiary.

Govindraj Ethiraj: Right. And what's your sense on Q1 results, which everyone is watching quite keenly?

G Chokkalingam: It's going to be a little disappointing as compared to Q4. So, the profit growth can be, you know, overall anywhere 5 to 8% only year on year, because of these disruptions caused by Iran war in June quarter. But definitely post that we saw oil cracking, even the metal prices coming down.

So, Q2 will be a better quarter in terms of earning growth. So, therefore, market will not get punished for the single digit profit growth, because the expectations for Q2, Q3 would be too good. And also, let us not forget that bond yield slowly moderated.

So, there is no scope for rate hike. In fact, monsoon, if IMD goes wrong, monsoon performance becomes normal, then there is a chance of even interest rate falling. So, all this would auger well for next two quarters.

Govindraj Ethiraj: Got it. Chokka, thank you so much for joining me.

G Chokkalingam: Thank you.

How are manufacturers responding to extreme climate situations?

We may be agonising over the delayed monsoons and now of course the impact of very heavy rains and loss of lives and livelihoods in the last 10 days or so but recall that just before that we were battling heat waves across the country posing considerable public health challenges particularly at workplaces. All of which leads to or has led to shifts in the way companies are organising their workforces and their workforce timings or their shifts.

So how are companies with large manufacturing footprints responding to this rapidly evolving situation. I spoke with Tejashree Joshi head of environmental sustainability at Godrej enterprises group on this theme. Now Godrej enterprises includes Godrej and Boyce which represents a range of well-known businesses including traditional furniture appliances and locks to aerospace and real estate.

I began by asking Tejashree how groups like hers were responding to the evolving challenges of climate and weather and what was at stake.

INTERVIEW TRANSCRIPT

Tejashree Joshi: I think it impacts enterprises in a big way, not only just, you know, the direct operations, but more and more we are becoming conscious about its impact on our supply chain and the entire value chain of the business. So if you ask me frankly, how are enterprises currently now responding to these kinds of climate events, I think climate change has become to a centre of enterprise risk management. So it's not just sustainability or something that you do good, but rather it is now hinging around how do you minimise the impact of the business continuity itself because of climate events.

And therefore ERM is essentially now addressing climate change as a big risk, not only from climate point of view, but also from social and business continuity point of view. Disruptions are real, we see that in operations. And let me first address the heat issue.

And we've seen extreme heats, you know, especially when it comes to manufacturing and construction sectors, which are a lot more physical activity per se. Therefore impacting the real on-ground work. This starts with beginning to think about this aspect all throughout the year as they prepare for manufacturing.

And there are multiple levels at which this is happening. It's looking at the work timings, how do the ships get staggered because of the extreme heat and you know, those very peak hot hours of the day, giving rest to the workmen during that particular periods of say between one o'clock to four o'clock or three o'clock in that sense. But at the same time, because we cannot actually start stop operations, staggering the times and giving rest is becoming important.

And it's not just one, it is intermediate multiple breaks, which are required to address the fatigue that comes in the workforce to maintain productivity. That's one part. The other aspect is about, you know, how is the physical environment in which the workmen are actually performing their duties, addressing these say air changes, or how do we keep the inside of a factory cool, at the same time driving our agenda on energy efficiency.

We can't lose the focus of that. So there are passive architectural interventions, which are happening in the factories where air changes, natural air changes are happening, but while they happen, how does the air get cooled so that you know, the working environment inside the factory is more bearable and doesn't impact the workmen per se, because even the processes generate heat, the processes generate fatigue. So air changes are extremely important at the same time, cooling that air is becoming more important.

And how do passive architecture basically play a larger role in that, along with, you know, mechanised and active ventilation support that we are providing. So these are infrastructure level preparedness that industries are now looking at. There's something called as physical climate risk assessments.

There are frameworks and these help companies or enterprises to evaluate their climate related risk to their infrastructure and assets, and address them by planning budgets, by putting in annual plans in terms of how these are to be addressed, and prepare for such events even before they occur. Because more and more we are seeing that this is happening more frequently. So it's not a one off event.

It's almost like kind of becoming more patternized in going ahead that the climate is not going to be as regular as it was. And therefore, you know, preparing the whole physical infrastructure or assets to get to that within the factory premise is one important aspect. When you use these frameworks, you get those indicators where these investments are necessary, and how they play out in sustaining the business and the workforce forward.

And it can be for heat, it can be for, you know, extreme flood events or drought, all of those climate risks.

Govindraj Ethiraj: And I'll come to that. So you talked about introducing more breaks or intermediate breaks during a shift, for example, which is not the same as before. How do you arrive at, let's say the most optimum number of breaks or the time for those breaks and at what time of the day, and so on?

Because I'm assuming you're moving from a classic, you know, tea, lunch, dinner phase to something different.

Tejashree Joshi: As you rightly said, it cannot be the same that it was as usual. Of course, you know, these hydration replenishment breaks are essential. But it is more so in terms of what is the heat and what is the delta increase in heat that we are seeing during the daytime, particularly the peak hours of the day, and addressing those hours very critically in terms of resting the people, especially if you go for a construction sector, I mean, people are really working outdoors, and they are direct exposure to sunlight, they need rest, they need to be rested, or they need to be allocated work which are indoors, and which are less physically intensive. You know, as you plan the work front, in a factory or on a construction site, there are different kinds of works where different levels of intensity of physical activity are essential.

So that planning needs also to be tweaked during these particular months, that how do you keep the workers engaged in productive work, but with a lesser stress in terms of physical stress by heat and activity, but carrying on those works which would otherwise, you know, be done in some other time, in a normal routine could be done at any particular time. That tweaking of activity, when you're planning the whole work on project sites, construction sites, or within the industry, within the factories, that becomes essential. Now, there's a difference in when you see inside a manufacturing plant, and when you actually see in a construction site, which is outside, you know, inside a manufacturing, it's much more controlled environment, air changes can be controlled by mechanical means, they're easily available, cooling breaks are present, hydration points are present, where people can actually access and address these issues. It becomes even more critical when you're talking about a construction site, which is outdoors. In that scenario, in fact, looking at more deeply in terms of not only just hydration, but providing very simple things like a glucose or, you know, during the hydration as well.

So, that doesn't impact in terms of dehydration to further workmen. It may seem to be small interventions, but they become very critical when you actually look at the stress that it creates if it is not done for people, especially when they are outdoors. So, we very carefully take care of that our construction sites address these make available these hydration points very close to the working places, where the physical movement just for water shouldn't be that exhaustive, that we'll try and avoid that.

That's how we try and address that. But it's all planned, it has to be planned before the event starts occurring. And accordingly, the work schedules also are created.

Govindraj Ethiraj: Right. And what you're seeing today or right now in many parts of India, now slowly across India is obviously extreme rains and the impact of that. And you talked about also the supply chain impact because of all of this.

So, how do you now then change or rather how different is the strategy for this kind of extreme weather conditions?

Tejashree Joshi: Basically assessing the risk across the supply chain. So, when you're looking at a supply chain, it's not just, you know, whether the supplier is capable of supplying to you the quality and the volumes that you expect, but also where are their physical factories located, from where is the raw material or the supply parts are really going to come. As I was mentioning about physical climate risk assessment for our own factories, we also extended to a supply chain continuity in terms of what are the high risk zones from where materials are getting sourced.

You know, and then there are multiple strategies by which you address. These kind of extreme events are happening and we see a pattern. There are things that you preempt and do in terms of not only assessing their capability of addressing the disruptions, but also look at, you know, de-risking if there is a very high critical supply chain which is falling into very quite vulnerable climate zone.

So, spreading the risk is extremely important nowadays if you want to look at a business continuity and not only in terms of capability, but also in terms of physical geographies, so that the disruptions are minimised. Of course, I would not say that they are absolutely not there. Very extreme events, I mean, we are not able to either predict it or address it, but minimal impact is what organisations are aiming.

De-risking in terms of spreading it, as I mentioned, also sensitising the supply chain in terms of this risk. Because many times, you know, the suppliers are MSMEs, small suppliers, they do not have the wherewithal to even do this assessment. If we are identifying certain risks that we have with a critical supplier, we help them address that or sensitise that in terms of that this can be a potential disruption.

A, for the large organisation, of course, the supply chain, but for that company itself, it's a big impact, even a larger impact because their whole operations come to a halt. In terms of, you know, inventory stock-ups, in terms of managing that, making that availability sustained for a certain period of time if disruptions are to happen, plus even the whole logistics of produce goods due to that impact. So, these analyses are done for the geographies which are to be served, the impact levels, how much of inventory stock-up needs to be done for addressing certain peak times of, say, a week or a month of whatever is estimated basis the risk assessment.

These are smaller actions. But largely, we have to look at it with an end-to-end risk perspective, right from, you know, the raw material sourcing to the dispatch of produce goods to our consumers end. All those touch points where this risk is pertinent or where the risk levels are higher as we estimate, those are to be addressed on a more systemic and a framework basis.

It's not just, you know, reactive actions. But what we do is basically start planning for these events at those touch points. Of course, you know, industry is gearing up.

Of course, no plan is foolproof. But I think certainly we are learning more to address these risks in terms of adaptations.

Govindraj Ethiraj: Tejashree, thank you so much for joining me.

Tejashree Joshi: Thank you so much.

Kotak Mutual Fund Report Insights

A new report by Kotak Mutual Fund says India's macro outlook has improved despite geopolitical shocks. It argues that following the West Asia ceasefire India's 26-27 macro outlook has improved, expects real GDP growth of about 6.6 percent, inflation to moderate and the current account deficit to remain manageable.

Though El Nino remains the biggest domestic risk. However it does say or sees evidence that private corporate capital expenditure has started rising which should support nominal GDP growth over coming years. It also says therefore that the investment cycle is broadening beyond government infrastructure spending.

It also believes that the recent reserve bank measures which other analysts have also been talking about to ease foreign investment rules and incentivise foreign currency deposits could attract about 50 to 75 billion dollars of inflows. It also says despite softer PMI readings manufacturing is showing resilience backed by electronics defence localisation smartphones and core industrial sectors and it estimates that the proposed agreements for free trade with the European Union trade agreement with the United States and another free trade agreement with the United Kingdom could add about 53 billion dollars to annual exports over the next few years. So what does this mean for valuations and markets the nifty 50 is trading close to its long-term average valuation mid caps and small caps continue to trade at premiums to history and therefore future returns are likely to come from stock selection rather than broad market expansion according to Kodak mutual fund and of course if macro conditions improve and capital inflows materialise India has scope for significant foreign reallocation.