Why Markets Are Still Weak | Oil Price Down | Govindraj Ethiraj | The Core Report

On Episode 382 of The Core Report, financial journalist Govindraj Ethiraj talks to Vijay Setia, former president of the All India Rice Exporters Association.

SHOW NOTES

• (00:00) The Take: The Givers and The Takers of Indian Stock Markets 
• (04:41) Why markets are still weak
• (06:50) Demand woes push oil prices lower, now around $71 a barrel
• (07:51) Basmati rice exporters project bumber crop, want export curbs removed
• (21:38) US Government warns against doing business in Hong Kong
• (22:28) The summer of 2024 was the hottest on record

The Take:

Indian stock markets consist of two types of participants: givers, who invest in IPOs hoping for returns, and takers, who raise funds. Recently, promoters of NSE 500 companies sold ₹87,000 crore in stocks, raising concerns about a market overheating. Strong IPO oversubscriptions hint at speculative activity, which could trigger corrections. While flows remain strong, it’s crucial that takers don't overextend and disrupt the market’s stability.

The Stock Markets Are Weak:

Indian stock markets are on weak footing, not due to negative news but the absence of strong positive cues. Last week, local markets responded to global trends, with the Sensex dropping 1,017 points to 81,183, and the Nifty falling 293 points to 24,852. Global factors like US interest rates, which are expected to fall, and negative sentiment from Wall Street also influenced the market. The Nasdaq fell 6%, its worst week since January 2022, while the S&P 500 and Dow Jones also registered losses. Reports suggest that SEBI may tighten derivatives rules to curb speculation.

Forex Reserves:

India’s foreign exchange reserves rose for the third consecutive week, reaching a record $684 billion as of Aug. 30, according to the Reserve Bank of India. The rupee, however, remains weak, at 83.94 against the dollar.

Oil Price Down:

OPEC has postponed an oil supply hike to counter falling prices, but this move has not reversed the downward trend. Oil prices slipped further to around $71 a barrel. Demand concerns and a potential surplus in 2024 continue to pressure prices.

Rice Exporters Warn of Bumper Crop, Want Export Caps Removed:

India’s basmati rice exporters are asking the government to scrap the $950 per tonne minimum export price cap as they face a bumper crop. Vijay Setia, former president of the All India Rice Exporters Association, explained that Indian exporters are struggling to compete with Pakistan, where similar rice is sold at a lower price. Without policy changes, excess supply could hurt Indian farmers, as they will be unable to export at competitive rates.

Doing Business In Hong Kong:

The U.S. government has warned companies about increased risks of doing business in Hong Kong due to U.S. sanctions. Hong Kong, though legally distinct from mainland China, is now more under Beijing's influence, leading to a corporate exodus and increased financial risks for firms operating there.

Hottest Summer:

The summer of 2024 was the hottest on record, according to the European Union’s Copernicus Climate Change Service. The global average temperature for June-August was 0.69°C above the 1991-2020 average. High temperatures affected productivity in various industries, especially auto sales, while boosting demand for air conditioners and other cooling devices.

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