Markets Fall 736 Points, Sensex Erases Most Of The Gains Of 2024

On today’s episode, financial journalist Govindraj Ethiraj talks to Harshvardan Dole, Oil Analyst and Vice President at IIFL (India Infoline Group) as well as Surendra Mehta, National Secretary of the Indian Bullion and Jewellers Association.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:00) Markets Fall 736 Points, Sensex Erases Most Of The Gains Of 2024
  • (02:52) Japan Raises Interest Rates To Zero, Ending The Negative Interest Regime After 12 Years
  • (05:06) Oil Heads Above $87 A Barrel And Why India’s Import Bill Is Rising
  • (13:43) Retail Sales Of Gold Slow Sharply On Record High Prices
  • (18:44) India Chokes Again, With 9 Of 10 World’s Most Polluted Cities

NOTE: This transcript contains only the host’s monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

Markets Fall, Sensex Erases Most of 2024 Gains

We noted the exhaustion from stretched valuations in The Core Report yesterday or Monday. On Tuesday, Indian equities fell again as there were no upward triggers even as some of the negatives including market regulator’s crackdown on mid caps and small caps weighed in.

The S&P BSE Sensex crashed 736 points to end at 72,012 levels, while the Nifty50 was down 238 points at 21,817.

At this level, the Sensex is fairly close to its January 1 start of 72,271 having thus erased all the subsequent gains of the year.

Predictably, IT services major Tata Consultancy Services or TCS was the biggest laggard on the benchmark indices, down 4 per cent after Tata Sons likely sold about 0.6 per cent stake in the company. 

JPMorgan Chase & Co., Macquarie Group Ltd. and Manulife Financial Corp. are among the firms that have flagged a shift in sentiment on Indian stocks, Bloomberg reported.

The recent actions by India’s regulators have “raised concerns among investors,” Macquarie analysts wrote in a note, citing interactions with investors based in Singapore and Hong Kong.

This overhang will obviously continue till the froth is weeded out which means that mid and small cap stocks are unlikely to rise as such even if they don’t fall further. 

Market watchers like G Chokkalingam and leading brokerages are zeroing in on specific stocks which of course makes sense but it can be confusing to many, I suspect, first time investors, who are often not researching their buys.

Japan Finally Raises Interest Rates to Zero

A nearly 12-year run of negative interest rates has ended with the Bank of Japan moving its key policy rate to at least zero

This was the world’s last negative interest rate, ending the most aggressive monetary stimulus program in modern history, while also indicating that financial conditions will stay accommodative for now, Bloomberg reported.

The new policy rate range would be between 0% and 0.1%, shifting from a -0.1% short-term interest rate, according to a statement at the conclusion of its two-day meeting Tuesday. 

A weaker yen pushed up the Nikkei 225 Stock Average to reclaim the key 40,000 level.

The negative interest rate regime is something that has been discussed widely by experts and non-experts alike.

The WSJ says the negative rates, after a delay, contributed to driving the yen down and import prices up, fueling the return of inflation. Despite some adverse effects, banking systems didn’t totter as feared, said WSJ.

Negative rates were an outcome of the global financial crisis of 2008 which caused many advanced economies to put many of the world’s advanced economies in a deep freeze sometimes called secular stagnation. 

Even after pushing interest rates down to zero, central banks struggled to generate what they viewed as a healthy level of inflation, says the WSJ.

In 2012, Denmark’s central bank imposed negative rates on deposits held by commercial banks, followed by the European Central Bank in 2014 and the Bank of Japan in early 2016, as well as Sweden and Switzerland.

In theory, according to the International Monetary Fund, a negative-rate policy “supports economic activity and inflation through the same channels as conventional interest rate cuts.” 

This year, many companies in Japan are using strong profits to give raises of more than 5% to workers. Inflation, pushed up by import prices, is running above 2%. That was justification enough for the Bank of Japan to end its negative-interest-rate policy.

Oil Prices Are Now Inching Towards The $90 Mark

Oil prices are holding after hitting a near four-month highs. Oil has also broken out of a range it was moving in for several months.

Brent oil was quoting around $87 a barrel overnight. These are numbers not seen since November, thanks to supply cut backs and signs of demand surges from both China and the United States.

Bloomberg said crude was on course for a third monthly advance after breaking free from a narrow range it had been trading in for much of the year. 

As we said earlier, OPEC supply curves have sent up prices. About 600,000 barrels of Russia’s daily refining capacity has been knocked out, according to Gunvor Group Ltd, quoted by Bloomberg. 

Back home, what do higher oil prices mean for India and Indian refiners ? Moreover, India has benefited from cheaper Russian crude which may not be easy to come by because of increased sanctions. 

As a matter of fact, a Bloomberg report says two tankers carrying Russian Urals crude have been anchored off Gujarat for several weeks and are most likely to go elsewhere without unloading the oil.

I reached out to Harshwardan Dole, oil analyst and VP at IIFL and began by asking him how he was seeing the high prices impacting India now and his outlook ahead ?

Retail Sales of Gold Slow Down On High Prices

Gold prices have now eased back a little after touching record highs last week, including around ₹66,356 per 10 gm on the Multi Commodity Exchange (MCX). 

In international markets, gold futures touched, $2,200 an ounce last week before steadying. 

The trigger for gold’s price rise is a bet that the Federal Reserve would cut interest rates earlier than expected though a higher than expected inflation number a day later calmed investors.

What is the outcome of the impact of these high prices on Indian markets? Also, gold imports shot up in February 2023 to $6.1 billion versus $2.6 billion for the same month last year.

I reached out to Surendra Mehta, National Secretary of the more than a century old Indian Bullion & Jewellers Association which also sets benchmark gold rates across India and began by asking him how he was viewing overall bullion prices and also its impact on the jewellery market.

India Is Choking Once Again

Nine of the world’s top 10 most polluted cities of 2023 were in India, with Bihar’s Begusarai town earning the dubious distinction of being the very worst, according to the World Air Quality Report released by the Swiss organisation IQAir, Bloomberg reported.

Delhi was the most polluted capital city in the world, with an average PM2.5 of 77.4. It came in 6th in the overall list. To make matters worse, India emerged as the third most polluted country out of 134 countries, the report said.

The quality of air in 2023 has worsened in India compared to the previous year, when India was ranked eighth in the most polluted list, with an average PM2.5 level of 53.3.

One of the most common forms of air pollution, PM2.5, “kills more people than any other pollutant that is out there,” said Glory Dolphin Hammes, CEO of the North American division of IQAir, which has released annual World Air Quality reports since 2017.

The impacts of this form of pollution, even at modest concentrations, are so severe that in 2021, the WHO tightened its recommended guidelines from an average of 10 micrograms per cubic metre to 5 micrograms per cubic metre today. 

The report found that last year, only 10 countries and 9 percent of global cities had air quality that met World Health Organization guidelines for harmful fine-particle, or PM2.5, pollution. 

Some of the places most affected were the Middle East, Africa, and Central and South Asia.

PM stands for particulate matter, and 2.5 represents its size — 2.5 microns, or 1/30th the diameter of a single strand of hair. And it’s PM2.5 particles’ tiny size that makes it so deadly.

India Reservoir Levels Fall

India’s main reservoirs have hit their lowest March levels in five years, government data showed, indicating a possible squeeze on drinking water and power availability this summer, Reuters reported.

The 150 reservoirs monitored by the government -which supply water for drinking and irrigation and are the country’s key source of hydro-electricity – were filled to just 40% of capacity last week, government data showed.

In Karnataka, the main reservoir was down to 16% capacity.

Water reserves are the lowest for March since 2019, when reservoir capacity fell to 35% and saw southern cities such as Chennai run out of water, said Reuters.

It’s a long and difficult summer ahead.

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