On Episode 993 of The Core Report, financial journalist Govindraj Ethiraj talks to Peter McGuire, CEO of Trading.com Australia and Chief Market Strategist for the Asia-Pacific region at XM as well as Shriram Subramanian, founder and managing director at InGovern Research Services.

SHOW NOTES

(00:00) Stories of the Day

(01:15) Why Indian Markets Have Gone Back 25 Years

(03:26) What The Combination Of High Oil Prices And Rising Bond Yields Means For Capital Flows

(12:11) Essar Group Is Back With $18 Billion Steel Project, But In The USA

(14:36) How Foreign Investors Are Buying Into Real Estate

(15:46) And The Logjam Within Logjams As Tata Trusts Comes Up With Merger Proposal To Save Tata Sons From Listing

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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 Wednesday, the 30th of September and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.

Our top stories and themes…

Why Indian markets have gone back 25 years

What the combination of high oil prices and rising bond yields means for capital flows.

The Essar group is back with an $18 billion steel project, but it's in the United States.

How foreign investors are buying into real estate

And the logjam within logjams as Tata Trust comes up with a merger proposal to save Tata Sons from listing.

Markets, Oil, and the Dot-com Flashback

Do you remember the dotcom bubble era? Well, it was a quarter of a century ago, so you may not have been around or it was a much younger version of you.

Well, here is one way of remembering that period via a market's lens. So the BSE Sensex is down 2.3% this week and is on track for an eighth straight weekly decline. And that would mark its longest losing streak since the end of the dotcom bubble era, a Bloomberg report has pointed out.

Moreover, as we speak, Indian markets are breaking through several support levels as the selloff gathers steam. The benchmark NSE Nifty 50 index has fallen for seven straight weeks and has wiped out about $250 billion in market value and broken through its 200-day moving average on a weekly basis for the first time in six years, the Bloomberg report said. The 30-stock BSE Sensex breached the same support level last week.

And stocks, on the other hand, if you want to look at the good news, are trading at their cheapest relative to earnings estimates since 2020. So there are big shifts happening. Some analysts have pointed out the divergence between economic growth or more specifically the GDP figures and the falling markets, which is that GDP figures are strong or rising, but the markets are falling.

Now, while it is true that the two don't necessarily go together, and there are times when markets are roaring away despite macro data not being very supportive, this must also make us revisit the GDP numbers and their construction or at the very least develop a better understanding for what exactly GDP numbers portray in India right now, for instance, high government capital expenditure, and thus not confuse them in future for broader economic growth and prosperity, and thus link them to market performance. This, by the way, is a emerging market or frontier market behaviour feature for years, if not decades now. And when I talk about behaviour, I mean the discrepancy if so between macro data like GDP numbers and stock market performance.

On Tuesday, oil prices were lower, but only relatively and more on that shortly. With this in the backdrop, the benchmarks were lower for the second day in a row. Thanks to those high oil prices and volatility in global bond yields, the Sensex fell 242 points to 72,529.

And the Nifty 50 was down 64 points to 22,716. In the broader markets, the Nifty mid cap and small cap were also down 0.99 and 0.8% each. So this is a holiday shortened week with Friday being a holiday for Gandhi, and the benchmark indices have lost close to 2% so far on top of nearly 6% in the last seven weeks.

And this is one of the longest losing streaks on record as we mentioned earlier as well. Now the benchmark 10 year US Treasury yield has hit a 19 year high of 5.27%. Now higher US Treasury yields means higher risk free return to global investors as opposed to the potentially riskier emerging market equities. Brent crude futures were down to about $104.70, so a little under $105 on Tuesday.

But you have to remember that Brent crude is now up almost 16% this month. Analysts told Reuters a clearer picture is emerging of higher oil export volumes leaving the Gulf, but much of that increase still relies on workarounds like ship to ship transfers and that these methods were less efficient and more costly than normal operations, which is why crude are still high. Saudi Arabia has resumed loading from its Red Sea port of Yanbu after restarting operations on the East-West pipeline, Reuters said.

Adding crude exports from major Middle Eastern producers has climbed to almost 13 million barrels a day in September, which is the highest since February. Now all of this is based on preliminary figures from data tracking firm Kepler and we referred to this yesterday as well. So between rising bond yields and high oil prices, how are capital flows likely to shape up in coming days and weeks and what is going to influence them more? I caught up with Peter McGuire, CEO of Trading.com Australia and Chief Market Strategist for the Asia-Pacific region at XM and I began by asking him how he was seeing capital flows and the role of bond yields and oil prices in them.

INTERVIEW TRANSCRIPT

Peter McGuire: I think a couple of things we can add to even that. First off, you've got, yes, higher energy prices, but we've also got higher bond prices. Yields are at very, very high levels.

Central banks are raising rates. Our lovely nation of Australia raised them today. So we're very conscious as far as the impact that inflation has to the wallet and the purse, to housing, to equity markets, the flow of an effect across the whole general community and spending power.

So there's going to be a lot of fallout as they raise rates. Naturally, retail sales, are you going to hit from a corporate perspective, those companies involved in these sectors, are they going to hit the numbers? We've got earning season coming through, the profile of growth from companies, are they going to hit the numbers from a Q3 perspective?

And how does that look into Q4? Second part, you've got the ongoing saga, as we know, regarding Iran and US. Is there going to be any form of resolution before the midterms, which is five weeks today?

Or are we going to say, as President Trump's saying, it's going to be post that period? We do understand that that can actually be drawn out. And we could be talking again in February and you say, Peter, how's it looking?

Well, it hasn't changed from the 29th of September. So the situation is fluid, it's dynamic, but the price sentiment is certainly driving markets higher as far as energy and everything else is, you know, I think, on a bit of a fine line as far as balancing.

Govindraj Ethiraj: Right. So the markets for a brief period appeared to have adjusted to the volatility in West Asia, but that seems to have now receded and the markets are once again responding to it or getting buffeted by it. Why is that?

Peter McGuire: Well, there is a point in time, I mean, market sentiment, traders also look at opportunity, they also look at where they see value. And if markets have had a bit of a correction, like the Indian market, there are many investors saying, you know, it was worth 500 rupee going back, you know, a year ago. Now it's 380.

I think it's value. I like its growth frontier. I'm looking for the next, you know, I want to hold this till the children are at 18.

They're currently six. I think it's cheap buying. Everyone has a different viewpoint.

Everyone looks at numbers a little bit differently. The quantitative analysis of a performance of a company, the qualitative, the management structure, the competition forces, all of these factors need to be considered from an investment standpoint. And then, as you said, you know, you look at the likes of Japan, some of these markets and the enablers and the hiker scale is coming out of South Korea.

It's mind blowing numbers as far as performance. But there are so many, I think, different dynamics being played out as we currently speak.

Govindraj Ethiraj: And as a result of this, or as a consequence of this, how are you seeing capital flows? And you did mention bond yields rising, which tends to pull capital back to markets where obviously yields are higher. How are you seeing flows into the region, particularly Asia?

Peter McGuire: Well, I think it'll probably start. I mean, you know, the natural attraction is higher bond rates. So in turn, that's no risk scenario.

There are traders that are looking out of there. And when I say traders, I'm talking about the man and woman on the street. They look for opportunity.

They look for where do I see, and that can be pensions as well, where do I see growth? Is it safer to be on the sidelines for the next 12 months and just put the, from a no perspective, it's a risk-free environment, just secure that bond market? And with it rising, that seems to be a very big attraction.

There is a point in time, an inflexion point that traders look and go, it's far safer to be on the sidelines and secure that interest as far as a payback or a coupon. The other side is, yes, you'll see inflows, and that will happen accordingly with, there'll be a price that people want to be a part of that market. They want to chase the yield.

And I think that we're probably starting to get close to that point that will materialise, I think over the next matter of months.

Govindraj Ethiraj: And what's your sense on the AI versus non-AI bet or bets? Where do we stand right now, particularly in Asia again?

Peter McGuire: Well, again, it's hard, I think, from a reality standpoint, Govinda, it's hard not to be involved in it from that, you know, that FOMO trade, the realisation, the growth numbers. I mean, you've got Micron, I think they're reporting tomorrow. And that's going to be, I think everyone's sitting on the edge of their seat to see the performance.

We'll have earnings season on our doorstep. And again, to dissect those numbers, look at the Cosby 50, look at what's happening as far as the likes of the enablers, all of the, you know, the Hynexes, the Samsons, we look at the numbers as the growth frontier, there seems to be still that enormous cost and build out of the AI sector or superintelligence, as President Trump likes to call it, that hasn't gone away. So if you're devoting that much capital to something, you would think that there's going to be a return.

And that is where we're at at the moment. I feel as though the 27 is going to be a very dynamic year as far as sectors, and of course, the performance of equity markets, both domestically and globally.

Govindraj Ethiraj: So you look at multiple assets across the region, or for that matter, the world, what's attracting your interest right now?

Peter McGuire: Well, I think you've got to keep an eye naturally on the precious metal market from a reality standpoint that has been sold off and sold off aggressively. And only in even in the last few days, it's nudging where we see some form of resistance. I feel as though the Q4 and Q1 of 27 are going to be quite an interesting point for precious metals.

There's a lot of big money from a trading environment has been concerned and wrapped around the energy sector because of the big volatility that it presents. There's still many traders saying we're looking this week as far as the states, what CPI, what GDP and what non-farm payrolls are going to be. That'll give us a good snapshot as far as where we see the Fed leading into another rate hike, either possibly by end of year, or do they sit on their hands?

All of these factors, it's very fluid and dynamic because one thing we've got to be conscious of is the very, very high interest scenario currently playing out. And what does that present to investors? Do we see a retreat from equity markets and the safety of the yield, or do people say, I still believe this has got more upside?

That's a very fine line. These are very unusual times when you're looking at the context of the global markets.

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

Peter McGuire: Thank you, Govind.

The Essar Group Is Back With An $18 Billion Steel Project

India's Essar Group backed Mesabi Metallics in the US is investing $18 billion to build a fully integrated American steel company, including what US President Donald Trump called the largest steel plant in American history in Iowa State. The investment proposes a $15 billion steel complex in Iowa and about $3 billion in an iron ore mine and pelletising facility in Minnesota. The project is expected to begin production by 2030 and will produce about 10 million tonnes of steel a year and employ about 1,750 people according to the White House as well as the company.

The announcement for the steel plant was made at the White House by the US President Donald Trump and he was alongside Essar Group founder and Vice Chairman Ravi Ruia and his son Rehwant Ruia who's also chairman of Mesabi Metallics. Now the Essar Group is not new to steel in India. It earlier owned Essar Steel in India which went into bankruptcy and in 2019 was acquired for about 42,000 crore rupees in cash by a joint venture comprising ArcelorMittal and Nippon Steel which was also the biggest stressed asset takeover in India's history at that time.

Following the takeover Essar Steel was absorbed into the new joint venture which was called ArcelorMittal Nippon Steel India. Arcelor holds a 60% stake and Nippon Steel holds the 40% remaining stake. Now back to the US, Essar's investment is part of an increasing flow of capital from India into the US.

In March President Trump had announced a new oil refinery in Brownsville, Texas backed by Reliance Industries though we've not heard much about it after that. In May the US Embassy cited investments from India adding up to about 20 billion dollars led by Sun Pharmaceuticals' proposed purchase of New Jersey's Organon and Company for about 12 billion or just under 12 billion dollars. Back home the government here has said that India's new policy plans 600 million metric tonnes of steel making capacity by 2047 and that's the roadmap for the next two decades.

As of now India's steel making capacity stands at about 220 million tonnes. A draft document of the policy was seen by Reuters which also points out or lays out plans to cut sector emissions and shore up access to iron ore and coking coal to meet anticipated demand.

How Foreign Investors Are Buying Into Real Estate

Meanwhile talking about foreign investment this time inbound, India's real estate market is attracted about nine and a half billion dollars in equity capital in the July to September quarter of 2026 more than twice the investment recorded in the same quarter last year as foreign and institutional investors have stepped up their investments in the sector.

According to CBRE's India market monitor investments for the third quarter of 2026 were more than double the 4.4 billion seen in the third quarter of 2025 and significantly higher than the 3.8 billion dollars in the second quarter of this year. CBRE officials said that this is a landmark quarter for India's real estate capital markets and global investors have returned with conviction and institutional capital is now flowing well beyond offices and land into data centres and reflects how deep and diverse India's real estate market has become. CBRE in a report quoted by Business Standard also said that India's real estate sector has already attracted about 18.6 billion dollars in the first nine months of 2026 nearly twice the corresponding period for 2025 and more than the 14 billion dollars roughly recorded in the whole of 2025.

Tata Trust comes up with a merger proposal to save Tata Sons from listing

The Tata Trust which owns 66 percent of Tata Sons and is presently in the midst of a pitched battle with the Tata Sons board and its chairman N Chandrasekaran has proposed merging Tata Electronics Systems Solutions Pvt. Ltd. and Tata Consulting Engineers with Tata Sons Pvt.

Ltd. Both companies are 100 percent subsidiaries of Tata Sons. Tata Electronics houses all the highly capital-intensive electronics and semiconductor forays of the Tata Group.

The result could be that Tata Sons will become a company with substantial operating businesses and revenue from its current status of an entity whose primary activity is holding investments. The Trust said in a statement issued on Monday that this would also be in line with the previous classification after 2004 by the Reserve Bank of India of Tata Sons as a non-bank non-finance company. So as a holding company of multiple Tata Group businesses, Tata Sons was classified as a core investment company or upper-layer non-bank finance company placing it under Reserve Bank of India regulations that need increased supervision and leading to a demand to be listed.

This restructuring could potentially address that because it will take it outside the regulatory definition of both a non-bank finance company and a core investment company. Now the proposal announced by Tata Trust on has to be approved by the Tata Sons board and the Reserve Bank of India. The restructuring proposal came from Noel Tata in his capacity as chairman of Tata Trusts which in 2025 had passed a resolution requiring Tata Sons to explore all options to remain unlisted according to a Tata Trust advisor speaking to media on Monday.

But all of this leads to an interesting logjam among other logjams because as long as the shareholders of Tata Sons are not on the same page, none of the major corporate actions can be pushed through. I reached out to Shriram Subramanian, founder and managing director of InGovern Research Services who's been tracking this development closely and I began by asking him how he was seeing the potential offer from Tata Trusts and how it could evolve from here on.

INTERVIEW TRANSCRIPT

Shriram Subramanian: I think the proposal is coming from the Tata Trust. Amongst all stakeholders, it looks like only the Tata Trust as a stakeholder is wanting TataSans not to be listed. If you look at the next largest shareholder, which is the 18.5% shareholder, which is Chapuji Palanji, they have clearly put out their stand that they would like TataSans to be listed. Another class of shareholders, which is the 12.5% shares held by the seven listed Tata Group companies like Tata Chemicals, Tata Motors, Tata Steel, Indian Hotels, Tata Investment, etc. These seven listed companies obviously don't seem to have a voice. And if they had a voice, I would think they would parrot the voice of TataSans, the management of TataSans.

And if I see this, the management of TataSans and the majority of the board of TataSans also want a listing. Otherwise, they wouldn't have put out the statement that they did on September 17th. So to that extent, I think more than 18 plus 12 is about 30% shareholders want TataSans listing.

The management and the board of TataSans want TataSans to be listed. Only the 66% shareholder doesn't want it to be listed. The regulator obviously has already put out a directive saying that TataSans need to be compliant with their regulations and that too, as soon as possible.

So almost immediate effect, they have said. So to that extent, the regulator wants TataSans to be listed ASAP to meet the requirements. This proposal, if anything, should have been placed with the RBI much ahead.

I mean, when they filed an application for deregistration, what were the grounds on which they filed the application for deregistration? They just paid back 20,000 crores and they waited for two years. Rather, if this had been enacted at that time, the merger, probably the board and the management of TataSans in the first place would have been amenable to such a proposal.

Two is the deregistration. RBI would not be in a position where they have to make an exception for TataSans. They would have had an application of a company which was not a CIC and they would have said this is not the CIC and they would have probably rejected or rather accepted the deregistration application.

Govindraj Ethiraj: Okay, so two separate things here. So I'll come to the Reserve Bank move in a moment. In a case like this, where let's say 66% of shareholders want a certain corporate action versus the others who don't, is it a simple majority prevailing?

Let's assume any corporate action in this case being let's say this merger or internal reverse merger.

Shriram Subramanian: No, corporate law, I would think is a super majority vote, which means 75% of voting shareholders need to vote for any proposal. So I would think that this will create a lead to a stalemate. In that sense, ASIS is what will prevail.

So even these two proposals which TataSans passed on September 17 will anyway be shot down by the 66% shareholder. So either way, it is like a stalemate. Neither party, I would think, can move.

I mean, if this merger cannot happen without the support of at least one of the other two block of shares, as I told you, which is the 18.5% or the 12% shares. On the other hand, an IPO cannot happen without the support of this 66% shareholder.

Govindraj Ethiraj: Right. Now to come to the Reserve Bank of India's action, deciding that a company, in this case, TataSans be listed, is it time bound? And if there is a failure in, let's say meeting that time mandate, what does it lead to?

What is the let's say the tearing hurry for anyone to do it? And if they don't, then what happens? Because it's not like there is any loss to anyone happening because TataSans did not list on time or there was a delay in listing.

Shriram Subramanian: Yeah, that's a pertinent question because TataSans has been non-compliant technically on paper for the last two years. So given that RBI has given this directive now, continual non-compliance may lead to one fine in that sense. It's obviously embarrassment.

I think TataSans is now beyond the point of embarrassment, so to say. And so I think more importantly, a fine, I would think.

Govindraj Ethiraj: Right. So let me come back to the primary question here. And as you said, there are September 17th resolutions plus this one.

Everything to move forward needs some kind of consensus. So what could typically happen next? If one were to take a step back, if nothing moves from either side, what's the way forward then?

Shriram Subramanian: So I would think there is a possibility that we're of either a total reconciliation facilitated by either the government or well-wishers in the business community or two is legal battle. Obviously, the sabres in that sense were thrown out the other day when two legal luminaries publicly were sort of said supported each of the other sides. I don't know whether they were formally professionally engaged by each of the sides, but they did air their views and they did sort of talk on behalf of each of the two warring parties, so to say.

It's a sad state as it is. I mean, philosophically, one can argue whether RBI is in the right path to force a private limited company to list. But this guideline came way back in 2021.

I think it was not challenged so much. Other entities ended up complying with the regulation. So TataSans is the only non-compliant, I would say, entity in that entire list of 17 names that RBI has put out.

Secondly, there was no proposal all these years to give liquidity to either the 18.5% shareholders, which is Shapurji Palanji. Unfortunate as it is, because I would think Shapurji Palanji has been in trouble. They would like the liquidity.

TataSans in good faith should have worked towards a liquidity situation for the Shapurji Palanji group. But they didn't. Secondly, 12 odd percent shares held by the seven listed companies.

This was a consequence of a rights issue which was done way back in 1995. And at that time, and these rights issues, because Tata Trust could not subscribe to the rights issue shares, they devolved on these seven listed companies which were cash rich and they infused cash. At that time, when market participants asked Mr. Ratan Tata, he assured these investors in these seven listed companies that they would soon get it liquid. But it is almost 31 years to date since that happened. So it is quite unfortunate that these 12% shares is also sort of illiquid and the seven companies continue to hold these illiquid shares. So on both shareholders, I would think benefit.

And so delisting or rather a deregistration as a CIC will not be workable for these stakeholders.

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

Shriram Subramanian: Thank you, Govind.