On Episode 890 of The Core Report, financial journalist Govindraj Ethiraj talks to Gaurang Shah, Senior Vice President at Geojit Financial Services as well as Dharmakirti Joshi, Chief Economist at CRISIL.

SHOW NOTES

(00:00) Stories of the Day

(00:50) Why global markets are now disconnected from war, geopolitics and rising prices.

(03:54) Will the RBI hike interest rates this week?

(12:44) Does it matter who is buying or selling in Indian markets right now?

(15:07) Why an India-Oman FTA is more than just that

(23:21) Negotiations for a deal to telecast the FIFA World Cup are almost as nail biting as a final match

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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 2nd of June and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes…

Why global markets are now disconnected from war, geopolitics and rising prices.

Will the Reserve Bank of India hike interest rates this week?

Does it matter who's buying or selling in Indian markets right now?

Why an Indian Oman FTA is more than just that.

And negotiations for a deal to telecast the FIFA World Cup in India are almost as nail-biting as the final match.

Markets, The War, Downgrades and AI

An energy shock has swept across the world and hit some countries like India more than the rest, but the stock markets could not care less. Global markets are still holding at near-record highs as a AI frenzy continues to send up prices, despite fresh attacks and missile exchanges between the United States and Iran, and no end in sight to a war that has now entered its fourth month. The disconnect between global markets and the real world of rising fuel prices and supply shocks is perhaps the highest it has ever been.

Iran and the United States said they both carried out strikes on military targets and each accused the other of acting aggressively as diplomatic efforts to end three months of war drag on, according to a Reuters report. And Iranian state media reported last evening the country's negotiators were stopping communication with the United States and that Tehran would completely shut off the state of Brent crude climbed about 6% after that to around $97 per barrel. Back home, Indian markets continue to be more sensitive to news on oil prices and war-related developments, or the lack of them, unlike global markets.

On Monday, the Nifty 50 and Sensex were down after opening strong in the morning. The Nifty 50 closed 165 points down at 23,382 and the Sensex was down 508 points to 74,267. The broader markets also fell.

Nifty mid cap was down 1.4% and the Nifty small cap was down 0.8%. Meanwhile, brace yourself because India Inc's earnings are likely to be hit more by firm crude oil prices in the backdrop of the West Asia conflict, according to a report by Bernstein, the stock brokerage quoted in the Business Standard. Earnings downgrades they said have resumed with 2026-27 estimates being already cut by about 3% so far. Even without a geopolitical shock, earnings risks, the note said, are skewed to the downside, including in sectors often seen as crude-proof.

While a de-escalation in the Middle East or West Asian war could trigger a relief market rally, Bernstein expects it to be short-lived given weak macro underpinnings and a likely revival in equity issuance. Equity issuance, of course, is an important reason markets will stay down as issuers suck out liquidity and also in many cases accelerate dollar outflows, as we have seen in the last couple of years. On Monday, the rupee was steady closing at about Rs 94.99 per dollar, almost the same as its close on Friday that was at Rs 95 to the dollar, according to Reuters.

Back to the AI fever and the global stock rally, chipmaker NVIDIA has now unveiled a new chip that claims to put AI capabilities directly into laptops and desktop computers, which also puts it against companies like Advanced Micro Devices or AMD, Intel, and Apple. NVIDIA CEO Jensen Wang, who is in Taiwan for the Computex conference, said on Monday that the RTX Spark PC chip is part of NVIDIA's effort with Microsoft to reinvent the PC for the AI era after working with each other for about three years. So the AI boom continues.

Will the Reserve Bank of India hike interest rates this week?

India's economic growth may have eased to about 7.2% in the first quarter of 2026, according to a Reuters poll of economists, thanks to weakening external demand and softer industrial activity. India's GDP mostly grew at 7.2% year-on-year for the Jan-March quarter, down from 7.8% in the previous quarter, according to that median forecast in a Reuters poll of 45 economists conducted between the 22nd of May and June 1st.

Estimates were between 6.1% on the lower side and 7.7% on the higher side. Elsewhere, India's industrial production has grown 4.9% year-on-year in April, that's a month before, according to the first official reading under the Revised Index of Industrial Production or IIP series, which uses 22-23 as the base year, and this was released on Monday by the Ministry of Statistics and Programme Implementation or MOSPI. The growth was led by manufacturing, which recorded a 6.2% increase from a year earlier.

Markets are also watching to see whether there will be any rate changes in the Reserve Bank's monetary policy decision and commentary on Friday. The expectation is that a rate hike, while possible, may not come this time. I reached out to Crisil chief economist D.K. Joshi and I began by asking him what were the various factors at play going into this time's monetary policy meetings.

INTERVIEW TRANSCRIPT

Dharmakirti Joshi: Since the last policy, which was announced in April, downside risk to growth has risen, and upside to inflation has also risen. And when RBI projected the economy's growth rate in its last policy, it did mention that there is downside to growth and upside to inflation, and some of that is materialising. And reasons for that are not very difficult to understand.

One, I think, is that the war continues to prolong. Second, I think, is that if you look at inflation going at particularly food inflation, then I think monsoons are always a worry, and now the PET has predicted rainfall at 90% below the long period average, and I think there's El Nino. I don't want to sound alarmist at this juncture because the distribution of rainfall also matters, and then people are also talking about Indian Ocean Dipole, which can generate rains towards the end of the monsoon season.

But having said that, the forecast has worsened, so I think on monsoons, fingers crossed, with the risks to the downside. Second item is that the government is now beginning to pass through the global crude price increases into the retail segment, and that will push inflation up. And then, I think, apart from the oil, there's also a number of input costs that have risen, and which reflects in the WPI, which spiked to 8.3%. Currency has weakened, so that means the risk of imported inflation is also there. And companies, I think, if their margins come under pressure, so they will pass on the input cost increases gradually to the end consumer. So, business inflation expectations have also risen, I think, as indicated by the IIM Ahmedabad Business Inflation Expectation Survey. So, I think risks to inflation are on the upside.

Some of them are materialising, but still, I think, most of the forecasts for inflation for the full year are quite benign, considering that last year was only 2.1% inflation. I think the risks are not fully getting reflected in the forecast, because I think everybody is trying to assess whether the shock is transient or it is durable in nature.

Govindraj Ethiraj: Right. So, all of this, what does it lead to, or what is the likely impact on an interest rate decision?

Dharmakirti Joshi: My sense is that the central bank will hold the interest rates steady, and they will keep the stance also unchanged, although there'll be a lot of caution, I think, in their guidance on growth on inflation, because these are uncertain times, and it's very hard to be linearly right, I mean, while projecting any number at this juncture. So, I would say that they will prefer a wait-and-watch approach at this juncture, and continue to assess the nature of shocks. I think what RBI worries most about is persistence of shocks, which can lead to generalised inflation, and I think that is what the central bank would like to avoid.

But in this policy, I think both the CPI headline as well as the core so far are reflecting pretty benign inflation, which I'm sure is going to change going ahead. As of now, I think they can adopt a wait-and-watch approach, and I think if the risks materialise at a faster pace, I think you can always do out-of-policy action as well. But I would not say that that is the base case at this juncture.

Govindraj Ethiraj: Right. So, on the other hand, the rupee has been depreciating, and there have also been calls for an interest rate hike to respond to that. So, how are you seeing that?

Dharmakirti Joshi: That's right. I think the interest rate differentials also influence the currency. But if you see the Indian bond yields, I think central banks started cutting rates last year, and actually the bond yields are higher than what they were before they started cutting rates.

So, I think the bond yields have already priced in some amount of fiscal stress, also high oil prices, and also I think which is essentially overall higher borrowings in the system. Having said that, the gap between the U.S. and the Indian interest rate has narrowed, I think, because U.S. is no longer in the zero interest rate regime. I mean, I think their interest rates also went up.

But I think to respond to currency pressure by raising interest rates, I don't think that is required at this juncture. And I think central bank has become more tolerant to depreciation of the currency, and they are rightly intervening when there is acute stress, I think, in the currency market. And I think that stance is going to continue.

I don't expect them to react to the depreciation pressure via interest rate movement at this juncture.

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

Dharmakirti Joshi: Thank you, Govind.

Why are Auto Sales up for May?

India's major car manufacturers have reported higher sales in May, with Maruti Suzuki saying that bookings for its compressed natural gas or CNG vehicles were up 40% after fuel prices rose due to the energy shock from the Iran war, according to Reuters. We reported on Monday that car makers like Tata's had also reported a jump in their electric vehicle bookings or EV bookings much higher than previous months. Petrol and diesel prices have gone up at least four times in the month of May, and car manufacturers are also grappling with higher raw material costs, supply chain disruptions, and labour issues, according to Reuters, which also added that car makers like Mahindra and Mahindra reported 11% increase, Hyundai about 9.1%, and Tata Motors about a 42% increase in sales.

Meanwhile, gross goods and services tax or GST collections were up 3.2% to over ₹1.94 trillion or ₹194,000 in May, as compared to an all-time high of ₹243,000 in April. Taxable supplies of goods grew about 27% during the reported period, reflecting domestic demand, while the same for services grew about 22%, demonstrating structural resilience in domestic consumption, according to a Business Standard report, which added that integrated goods and services tax collection from imports rose about 19% during May.

What are the Benefits of the India-Oman FTA?

The India-Oman Comprehensive Economic Partnership Agreement, or CEPA, signed on the 18th of December last year has kicked in as of yesterday, becoming India's fifth free trade agreement to be implemented in the last five years and its 15th overall. To mark the entry into this new agreement, about 10 consignments of agriculture and gems and jewellery products from Mumbai, Kolkata, and Chennai were shipped to the Gulf nation under those preferential tariffs, according to a Business Standard report.

Oman now is India's second-largest trading partner in the Gulf region and serves as a strategic gateway to the wider GCC, or the Gulf Cooperation Council, market through its advanced port infrastructure. Bilateral trade between India and Oman touched about $11 billion last year, up from about $10.6 billion the previous year. A report authored by Ajay Srivastava of the Dogel Trade Research Institute says that unlike most Gulf countries, which rely on shipping through the state of Ormuz, much of Oman's coastline is located outside the state, directly on the Arabian Sea and the Gulf of Oman, and this allows major ports like the port of Salalah and the port of Dukhum to remain accessible even when traffic through the state is disrupted.

As a result, Oman can continue serving as a reliable trade and energy gateway through periods of conflict and instability in the Gulf. GTRI says that the SEPA thus strengthens a relationship that is as much about securing reliable supplies of energy and industrial inputs as it is about expanding bilateral trade. Meanwhile, India's proposed trade agreement with the United States will reflect legal changes to Washington's tariff regime, according to India's Commerce Minister, who spoke on Monday, even as negotiations, he said, move towards the conclusion of the first tranche of the bilateral pact.

Meetings are scheduled for this week, the Commerce Minister said, and also added that leaders of both nations had already announced the framework back in February. That's the framework agreement. But the important thing to note is that the US Supreme Court has struck down a number of tariffs imposed by the Trump administration under the International Emergency Economic Powers Act, ruling that the law does not authorise the President to impose such tariffs and such powers rest with Congress.

Now, what all of this will specifically mean in India's own negotiations, considering that the US Supreme Court ruling nullifies many of those objectives is obviously something that we have to see.

Who is Buying and Selling in Indian Markets right now?

Back to the stock markets, there's been considerable debate about whether foreign portfolio investor exit has been in effect balanced by domestic institutional buying and to what extent foreign portfolio investors have sold something like $50 billion in the last 18 months. And there is no letter, including in the month of May, saw another three and a half billion dollars go out.

So who is selling and who is buying? And more importantly, at this point, does it really matter? I posed this question to Gaurang Shah of Geojit Securities, and I asked him really to respond to the primary question about who was driving the flows.

INTERVIEW TRANSCRIPT

Gaurang Shah: So, I think by and large what we know, Govind, as per the data that has been put out in the public domain that, of course, I'm talking about the larger investors. And historically from, if I'm not mistaken, from 1st of October 2024, FIs have started selling and they've continued till the end of 2024 December. They again continued in 2025 the entire year and starting from this year, Jan 2026 till date, they have sold left, right, etc.

And the domestic institutions have been net-net buyers. Along with that, there have been a lot of different approach, Govind, in terms of the trading mentality shifting onto an investor's mentality. So, that has also added to the sentiments.

Along with that, the SIP flows have been at record levels and domestic institutions have been net-net buyers. And what I know of the data from Jan 1st till date, FIs have sold somewhere close to about in excess of 2 lakh crores. Now, if you put together the entire figure, whatever they've sold this year, whatever they have sold last year, that is 2025, and whatever they sold in the last three months of 2024 October to December, the quantum is huge.

And despite of that, the markets have not given you a very deep correction. What I'm trying to say, Govind, is had it been for any other emerging market, and if this kind of selling would have taken place, that market possibly, according to me, would have been down and out at least 40-50% or maybe more. We have corrected about 18-20% from the highest to the recent lows that we've seen.

Again, if my calculations are right. I have mentored one thing, Govind, and as a disclosure on your platform, on your channel, I cannot invest directly into equity markets because of certain compliance and regulation issues. I have not stopped my SIP.

In fact, I just started a new one a month back, and I'm planning to start another new one. So the message that I'm going to get across, the last question that you asked, does it really matter? It doesn't matter.

Okay.

Govindraj Ethiraj: So the reason I'm also asking is, we are viewing everything from the lens of either FIs or domestic institutional investors, who are obviously recipient of systematic investment plans of the kind you spoke of. But apart from that, there are others who are also selling and buying, I mean, for instance, let's say family offices or other large funds, they've also been selling in the last year or so. So my question is not confined to them.

But all I'm trying to understand is, this market has more characters or players than just these two, or is it just these two sets that define everything?

Gaurang Shah: So these two sets are the larger players. The other what you spoke about, family corporate houses or promoters, or parent company, we've heard about it a couple of times in the Indian listed universe where the parent has sold off, for example, Whirlpool, etc, etc. But those are not continuous.

They happen sporadically, they happen over a period of time, and they don't get repeated. Because once if the promoter wants to sell and he's done and dusted and he's out, he's not going to come back. Unlike the FIs who have been constantly selling, unlike the DIs who have been constantly buying.

So there has been a correction, yes. But this correction, according to me, is not that deep or concerning. Of course, what we don't know is when this entire geopolitical issue will come to an end, how, when, which form and what will be the terms and conditions, but it will come to an end.

And unfortunately, this time in this geopolitical situation, there is a country called Iran, and there is a passage called State of Hormuz, which happens to be a very important line of transportation as far as India is concerned.

Govindraj Ethiraj: And how are you seeing overall institutional investor sentiment? And when I say sentiment, I'm trying to distinguish a little between, let's say, the capital that maybe domestic institutional investors have and would have no choice but to invest. And on the other hand, let's say foreign portfolio investors who are selling, but again, may be driven by, let's say, other factors or external factors.

And there are whole bunch, AI is one of them, but there are a whole bunch. So my question really is what's the inherent or the sentiment or the outlook towards Indian markets at this point of time from your understanding?

Gaurang Shah: So the uncertainty or the concern regarding the FI's selling, according to me, are three things. One is negative on India because of headwinds in terms of 80% of our energy requirement we import, depreciating rupee against the dollar. Third one is the monsoon forecast earlier.

It was 94 to 96% shortfall of long-term averages. The renewed one comes to about 90% by the Met and the Skymet department. And of course, what we saw fourth quarter, which was curtains down last week for the last financial year, the impact of the geopolitical situation was not felt as much.

But if this thing drags on, then the impact of the geopolitical situation is going to first quarter and second quarter earnings, this new financial year. That's when possibly we'll see downgrades or downward re-rating, etc., etc. happening in case if the rate is going to be far bigger than what the street has estimated.

So these are the things that I feel could be the reason why FI's have been a little bit or rather a large part of it underweight and selling and opportunities in the other emerging market go in. That's the fact. The data is in front of us to see that why FI's have sold India and won into maybe China, Taiwan, Malaysia or any other emerging market because of the kind of difference that is there between India and the other emerging market.

So my sense is that if this situation does not go out of control and if the impact of this geopolitical situation is not felt as seriously on the first and second quarter earnings, then possibly you might see FI's again coming back. Of course, this is a little bit premature thinking, but they will definitely look at the kind of GDP run rate. We heard the Finance Minister also, Srimati Nirmala Sitharaman, speak about making certain changes to attract flows back into Indian equity now.

Govindraj Ethiraj: Last question. So as you see the markets right now, and they're obviously moving up and down depending on oil prices or what, let's say, statements come from the United States or for that matter, Iran. Are you seeing sectors or themes break away to any extent from the broader sentiment at this point of time?

Gaurang Shah: There are definitely goals. So sectors which are directly dependent on crude and crude derivatives, of course, we've seen them. For example, if the oil prices come down, you see all the three oil marketing companies up for 5% and oil exploration like ONGC and Gale or others, they fall off the cliffs and vis-a-vis crude oil prices go up, oil exploration companies go up, oil marketing companies go down.

There are sectors like paint industry, tyre manufacturing companies to a certain extent, which gets directly impacted by rising crude oil prices. So there are pockets. I'm not saying that there is total safety net or a safety shield, but sectors like IT, pharma, healthcare, I'm talking about hospitals, power generation, to a certain extent, telecom service provider companies, because they don't get impacted as negatively, they'd have very less to do with this.

So these are the sectors and defence. I was just reading a report that India has virtually sealed the BrahMos deal with Vietnam. And another deal is on its final stage as far as Thailand is concerned for supply of BrahMos.

And we heard the Honourable Raksha Mantri Rajnath Singh ji also speak about the opportunities that are there. So there are plenty of opportunities, provided you have a longest time.

Govindraj Ethiraj: It's a good note to end on. Gaurang, thank you so much for joining me.

Gaurang Shah: Always a pleasure, Govind. Thank you.

Who will get the rights to Broadcast the FIFA World Cup in India?

The deal to watch the FIFA World Cup in India has turned out to be almost nail biting as a FIFA Cup final match or somewhat similar. Just 10 days before the series is set to start, FIFA has struck a deal with Zee Entertainment to broadcast the 2026 World Cup.

The negotiations between FIFA and multiple potential partners have been on for several months, including Reliance's JioHotstar. This is a bounce back of sorts for Zee Entertainment, who has not been much in the news of late, at least for the right reasons. The Reliance Disney joint venture GeoStar holds rights for other sports, including the Indian Premier League or IPL cricket tournament to the English Premier League.