Markets Hit New Highs And Break Records On Global Cues

On Episode 264 of The Core Report, financial journalist Govindraj Ethiraj talks to Atul Chaturvedi, President, Solvent Extractors Association (SEA) and Chairman of the Asian Palm Oil Alliance (and Chairman of Sri Renuka Sugars) as well as Rahul Jain, Vice President at Dolat Capital and IT industry analyst.

Our Top Reports For Today

  • (00:00) Stories Of The Day
  • (01:00) Markets Hit New Highs And Break Records On Global Cues
  • (03:11) How Wall Street Is Bracing For No Interest Rate Cuts At All
  • (04:53) Gold Prices Hit Fresh Records As Central Banks Step Up Buying, Now Silver Follows
  • (07:08) Low Cooking Oil And Sugar Prices Are Keeping Inflation Down. Diving Into The Mechanics
  • (19:16) Should CEO’s Be Closer To The Troops? Wipro Sees Another Departure

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 Hit New Highs, Records

It was a general record breaking day for the stock markets with benchmark indices the BSE Sensex and NSE Nifty hitting new lifetime highs.

The trigger appears to have come, once again, though after a while, from Wall Street. Nasdaq and S&P 500 ended over 1% higher on Friday after a positive job creation report for March.

A strong economy also means that interest rate cuts in the US might take longer and there are some interesting theories on that which I will come to in a moment.

Back home, auto, energy and metal stocks were the big drivers of prices. 

The Sensex hit a fresh lifetime high of 74,869 before ending the session at 74,742, up by 494 points while the Nifty hit 22,697 before settling at 22,661, up by 152 points.

The 10-year Indian government bond yields rose to 7.14%, similar to US Treasury yields which went up after strong economic data further pushed back expectations around the timing of the first rate cut by the Federal Reserve.

Foreign investors have stepped up again, buying stocks worth around Rs 1,700 crore on Friday, according to Moneycontrol.

Early signs of Q4 results are in and all, including companies like Voltas have reported strong performance on their product sales.

We have to see the financials though.

TCS will declare results on March 12 or Friday.

Brokerages like Motilal Oswal are expecting Nifty earnings to grow 6% year on year while Kotak Equities is expecting 4%, says Moneycontrol.

If you have been following growth and sales numbers in general including on The Core Report, you would have noted that sectors like auto which are seeing record numbers will likely post results that will be strong and higher than other industries.

Will US Cut Rates Or Not?

After a new jobs report in the US on Friday showed that the economy was still running strong, more traders are betting the Fed may cut the benchmark federal-funds rate just once or twice this year, fewer than officials’ last median forecast of three quarter-point cuts

Some are even saying that the central bank will leave rates where they are, the WSJ is reporting.

As even likely developments go, this is dramatic.

The stock market rally is built on the fact that the economy would slow enough for the Fed to lower borrowing costs from multi decade highs above 5%.. 

Instead, the market is now faced with the prospect of growth and inflation keeping rates far higher than anticipated. 

So while stocks recovered ground after Friday’s jobs data, the Dow Jones was down 2.3% for last week.

Now investors are looking out for Wednesday’s consumer-price index. Inflation has cooled significantly from 40-year highs, but two months of stronger than expected readings have reinforced the Fed’s wait-and-see approach to cuts, says the WSJ.

Back home, while the RBI does not necessarily get influenced by the Federal Reserve and is largely driven domestically, the world is obviously watching to see how the Fed moves or does not.

Moreover, in India, there is little correlation between lower interest rates and flows into money markets as investors particularly are looking to beat inflation by investing in equities versus other financial instruments.

Gold Prices Spike Again, Silver Follows 

Elsewhere, gold prices rose again.

Central banks like China and India are powering much of the purchases.

According to Bloomberg, China’s central bank has purchased gold for its reserves for a 17th straight month in March, extending a buying spree that has helped the precious metal surge to a record.

Apart from China’s central bank, Bloomberg says Chinese consumers are worried about wilting returns in other assets and a depreciating currency. On Reddit Inc.’s platform, self-proclaimed “stackers” boast of hoarding bars and coins.

Silver prices globally were at a 3-year high and silver prices in India are at an all-time high at near Rs 82,000 per kg. 

Silver prices were up 11 percent week on week, and 14 percent month on month.

We had earlier on The Core Report spoken of the demand spikes in silver both from consumer and industrial sectors, including areas like renewables and electronics.

Oil Consumption Down For India, Prices Edge Down

India’s fuel consumption fell 0.6% year-on-year in March, but demand for the 2024 financial year was up about 5%, primarily driven by higher automotive fuel and naphtha sales, Reuters reported.

Total consumption, a proxy for oil demand, totalled 21.09 million metric tons (4.99 million barrels per day) in March, down from 21.22 million tons (5.02 mbpd) last year, preliminary data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Saturday.

However, fuel demand for the 2024 financial year, ending in March, hit a record high of 233 million tons compared to 223 million tons a year earlier.

Sales of diesel and gasoline rose between 3% and 7%. 

Meanwhile, Brent Crude prices have now slipped below $90 a barrel again, so many Governments for sure, at least those buying oil like India, must be breathing a sigh of relief, at least for now.

How Edible Oil Prices Are Keeping Inflation Down?

We have been talking about food inflation frequently. One big reason it is staying up right now is vegetable prices, where inflation is a staggering 30%. 

The high inflation rate is compounded by the fact that prices swing so suddenly that there is no real way to manage them, for reasons we discussed in yesterday’s conversation with Crisil Chief Economist D K Joshi, who also defined it as the cobweb effect where farmers take up a crop when prices are high and do not when prices are low. Which of course causes a problem on supply.

After vegetables, even pulses or dals are at 19% which is also very high and this has been steadily high and not fluctuating like vegetables. Only cereals which include rice and wheat are at a lower rate which is around 7.6%. All these figures are for February 2024 released in the second week of March or last month.

Now, the only area where prices are low and have stayed low is oils and fats which are at a negative 14%

So how and why is this happening with cooking oil that is an important part of our food consumption ? India imports almost 2/3rds of its edible oil requirements, almost like crude oil though crude oil is higher. We have dwelt on this theme before as well but it is interesting and worth revisiting, particularly in the current context.

I reached out to, as I did before, Atul Chaturvedi, President, Solvent Extractors Association (SEA) and Chairman of the Asian Palm Oil Alliance as well as Chairman of Sri Renuka Sugars and I began by asking him to describe the edible oil market right now.

Wipro’s Revolving Door

Before I come to the latest CEO exit for Wipro and what it means, IT Services companies like Wipro, TCS and Infosys have run interesting experiments, for lack of any other term, with their CEOs. Before I come to some examples, here is the poser.

Where should the CEO of a company sit? Where the clients sit or where the employees sit?

For a smallish company – whichever way you define it – the answer may be simple.

But for a largish company and I will come to numbers shortly, the equation shifts a little bit.

So, Wipro has around 240,000 employees, TCS has around 614,000 and Infosys has around 335,000 employees. These are very large numbers.

I am reckoning roughly 80% of these employees, so say around 200,000 sit in India.

So the 20% for Wipro if it is sitting closer to customers or around them in North America or Europe is also a large number, but proportionately small compared to overall size.

So as we know, some 60% of revenue, let’s say for a company like Infosys comes from North America alone.

It’s safe to say that 80% of revenue for most IT companies comes from these markets.

So the CEO should obviously be sitting next to clients.

That was the argument most likely in the case of Thierry Delaporte, who stepped down as CEO of Wipro last week a year ahead of his term ending in July next year or 2025.

But Thierry was mostly working out of Paris and thus mostly away from the company’s HQ in Bangalore.

I don’t know the details but the fact that he was not here and potentially his disinclination to move to India full time, as I understand, may have played a role in his going.

His successor, Srini Pallia on the other hand is a Wipro veteran who started in Wipro and has been there for over 30 years.

But then, Srini sits in New Jersey and will work from there. So he is an old hand but does not sit in HQ. So to that extent, his presence in Bangalore is not so critical as his proximity to clients.

Thierry of course was an expatriate and unusually an European and not a Wipro lifer as Srini is.

Both Infosys CEO Salil Parikh and TCS CEO K Krithivasan are based in India, though Krithivasan likely moved from Chennai to Mumbai when he took over as CEO recently.

Salil Parikh worked with Cap Gemini earlier in Mumbai. Incidentally, Delaporte was CEO of CapGemini.

Vishal Sikka, earlier CEO of Infosys, was sitting in the US and did not spend much time in Bangalore. And that caused some problems as well, at least going by reports. He left and made way for Salil Parikh.

So, apart from Bangalore traffic which could surely and quite seriously put off several potential executives, I did not see a trend.

But Wipro itself has had more exits and faster ones than most others. I have interviewed at least three of them including T K Kurien and Abidali Neemuchwala, who preceded Delaporte. Kurien of course has stayed back to run Premji Invest, the investment arm of the Premji family.

Is it possible then that CEOs leave too fast or don’t get enough time.

The tenure of CEOs itself is shortening everywhere but maybe Wipro’s revolving door is just spinning too fast, wherever the CEO sits.

So let’s focus on the other question. What ails Wipro itself and what is working for it and not in the context of the industry which itself is facing pressures.

I reached out to Rahul Jain, VP at Dolat Capital and also IT industry analyst and began by asking him how he was seeing Wipro presently?

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