Indian Markets Find Their Footing Again

• (00:00) Stories Of The Day
• (01:00) Indian Markets Find Their Footing Again In Holiday Shortened Week
• (02:27) Goldman Sachs Says US Equities Are Fairly Valued, India Has Significant Upside Despite Rally
• (03:39) Mid Caps And Small Caps Are Bottoming Out, Is That Good News
• (10:01) Oil Prices Slide After A Break, Where Is It Headed Next?
• (18:13) A Bridge Collapse Exposes Supply Chain Fragilities Again

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.

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Markets Find Their Footing

As trading days go, Wednesday was a good day and perhaps better than expected for many.

Indian stock markets were up, lifted by  index heavyweights like Reliance Industries, HDFC Bank and Maruti. 

The BSE Sensex closed up 526 points up at 72, 996 and the NSE Nifty 50 was up  119 points to close at 22,124. 

Reliance Industries was very strong, making up 58 per cent of Sensex gains after Goldman Sachs raised target price on the stock. More on Goldman coming shortly. 

The rupee weakened slightly on Wednesday, after Asian peers were down. The rupee was at 83.32 against the U.S. dollar on Wednesday, compared with its previous close at 83.28.

The rupee is expected to see "sideways price action" between 83.20 and 83.40 during the session, with the Reserve Bank of India expected to defend the currency from hitting all-time lows, foreign exchange advisory firm IFA Global said in a note, reported by Reuters.

The rupee had fallen to its record low of 83.43 last week but has since recovered.

Goldman Says US Fairly Valued, India Still Strong

A top Goldman Sachs strategist told CNBC on Wednesday he felt that US equities were fairly valued right now and there was limited upside at current valuations.

All major US Indices are at their record highs.

On the other hand, Goldman Sachs saw India as a strategic long term growth story with significant upside in the stock market, James Ashley, head of international market strategy at Goldman Sachs Asset Management told CNBC.

U.S. stocks have “limited upside” from here, given the macroeconomic backdrop — and investors should be looking for better opportunities elsewhere, according to Goldman Sachs Asset Management.

“Where we see many other economies beginning to slow for both secular and indeed cyclical reasons, in India’s case, we see the start of a very significant upswing,” Ashley added.

“We’re looking at an economy here that could be growing at double-digit nominal GDP rates for the foreseeable future.”

Ashley acknowledged that while India’s markets were not  “cheap” right now, there was still “significant upside based on that growth story.”

“How do you play that? I think there’s an across-the-board story. It’s not about one particular sector, and if you look at the small and mid-caps in particular, there’s a huge opportunity to generate alpha in that market,” he told CNBC.

Speaking of small and mid caps, we all know there has been a significant decline in these stocks. 

Importantly, this is also the segment of the market regulators have been raising alarms, notably the Sebi, warning about exuberance and even asking mutual funds with small and mid cap portfolios to run stress tests to see what would happen if investors were to suddenly start redeeming their units.

On the other hand, some brokerages are already calling the bottom here.

So where do we stand? I reached out to market analyst and veteran Ambereesh Baliga and began by asking him how he was seeing the current state of the mid cap and small cap cycle?

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Morgan Stanley Revises India GDP Forecast

Morgan Stanley has joined other institutions in revising its gross domestic product (GDP) growth forecast for the financial year 2024-25 (FY25) in its case to 6.8 per cent, up from the previous estimate of 6.5 per cent. 

Morgan Stanley also revised its growth forecast for the ongoing financial year (FY24) to 7.9 per cent.

Morgan Stanley expects India's GDP growth to remain robust, with an anticipated growth rate of around seven per cent in the fourth quarter of FY24 (quarter ending in March 2024). 

This growth momentum is expected to be widespread, with converging gaps between rural-urban consumption and private-public capital expenditure in FY25, Business Standard reported.

Moreover, the firm foresees a favourable inflation trajectory, with recent trends indicating a moderation in headline inflation. 

Oil Slides After A Break

Crude oil prices fell for a second day Wednesday after an industry report pointed to large build in U.S. petroleum stockpiles.

Brent was around $85.6 overnight on Wednesday.

The American Petroleum Institute said crude stockpiles rose for the week ended March 22.

Brent is already up a shade over 11% this year.

To get a sense on what were the forces that were driving crude prices right now and to get a sense on the outlook, I spoke with well known oil analyst Vandana Hari of Singapore-based Vanda Insights and began by asking her what she was seeing in the oil market right now

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Japanese Yen is At 34 Year Low

The Japanese yen has dropped to its weakest level in about 34 years against the dollar.

The currency dipped  to 151.97 per dollar in Tokyo on Wednesday, passing the 151.95 level that prompted Japan to wade into markets in October 2022, Bloomberg reported. 

The yen then strengthened later in the day after a report of a meeting between officials of the finance ministry, the central bank and the financial regulator.

 Authorities in Tokyo spent ¥9.2 trillion ($60.6 billion) in 2022 to prop up the yen on three occasions, each time insisting that they were not protecting any specific currency level, Bloomberg reported.

This is in case you wish to draw any inferences to India’s own currency management approach.

Gold Imports Falling Thanks To High Prices

India's gold imports will fall by more than 90% in March from the previous month to hit their lowest level since the Covid pandemic as banks cut imports after record-high prices hit demand, a government official and two bank dealers told Reuters.

Gold imports were at unusually high levels in recent months. In February, gold imports rose 133% to $6.15 billion.

Domestic prices rose to a record 66,943 rupees per 10 grams earlier this month. HIgh prices also lead to customers exchanging old jewellery for new.

A Bridge Collapse and The Domino Effect

ONce again, the world has been reminded through another unfortunate accident, the importance of global supply chains and the domino effect the failure of one link in the chain could cause.  

On Tuesday, a container ship rammed into Baltimore’s Francis Scott Key Bridge, sending much of the nearly 50-year-old steel structure into the river below.

Baltimore isn’t a huge port for containers — about 3% of the total on the East and Gulf Coasts, reports Bloomberg but it handles the nation’s largest volume of automobiles, as well as a lot less-consumer-facing items like coal, gypsum and lumber. 

With total trade last year amounting to about $80 billion, every day Baltimore is closed is another $217 million that’s not crossing its docks.

Meanwhile, car companies like Ford and GM are rerouting traffic but all of which will involve longer shipping times and of course increased costs: The No. 2 port for car carriers is in Brunswick, Georgia — about 700 miles south.

Farmers gearing up for planting season may also feel the impact, as Baltimore had  become the leading U.S. port for importing combines, tractors, hay balers, excavators, and backhoes, because of its proximity to the US Midwest’s major farm and construction equipment manufacturers, said Bloomberg.

Closer home, the Suez Canal is practically blocked off for much of traffic coming to or going from India because of tensions in the middle east, which we spoke of earlier in the show with Vandana Hari as well and many ships are forced to go around Africa.