Good morning. In today’s edition — Microsoft boss Satya Nadella’s alluring promise of artificial intelligence (AI) only boosting productivity, rather than killing jobs;  two top underperforming top weightage stocks; and ease of restrictions on NBFCs. 

JANUS VIEW

Alluring Promise Of AI To Raise Productivity Rather Than Kill Jobs

Satya Nadella visited India this week to announce a slew of investments in developing AI and AI capability, totalling $3 billion. The maker of chips powering AI, Nvidia, also announced a major expansion of its operations in India.

Stock markets around the world have tended to come out of the spell that AI had cast on investors, causing them to loosen their purse strings and buy into the AI story as they understood it. Assorted sharp practitioners have profited from the herd preference for AI. Now that it is becoming increasingly clear that not every company that adds the appellation AI to itself is going to turn in magical improvements in productivity and profits, investors are turning more discerning about how they chase their AI dreams.

Microsoft seeks to persuade its customers to adopt its Copilot suite to create a variety of sector- and use-specific Copilot agents, to automate a lot of grunt work and generate actionable output. But Nadella has maintained that AI will improve productivity rather than take away jobs. 

PODCAST

On Episode 477 of The Core Report, financial journalist Govindraj Ethiraj talks to Tarun Pathak, Telecom Analyst and Research Director at Counterpoint Research.

• Markets are sliding away.

• RBI wants to improve its data forecasts.

• The Indian mobile phone market has stagnated.

• 52 of 59 ultra luxury properties worth Rs 4,750 crore bought in India last year were in Mumbai.

• Mercedes has a record sales year in India.

• Electric car maker BYD sells more hybrid cars than electric.

CORE NUMBER

Rs 1.27 lakh crore

💸 This is the total debt mutual fund outflows recorded in December 2024, contributing to a net industry outflow of Rs 80,509 crore, according to data compiled by the Association of Mutual Funds of India (AMFI).  The substantial outflows from debt funds, coupled with equity fund inflows rising by 15% month-on-month to Rs 41,155 crore, indicate a strategic reallocation of assets towards equities.  Systematic Investment Plans (SIPs) also hit a record high of Rs 26,459 crore, highlighting sustained confidence in equity markets despite the significant exit from fixed-income securities.

FROM THE PERIPHERY

—📱 Weak domestic and global demand has left almost half of India’s mobile phone manufacturing capacity under the production-linked incentive (PLI) scheme underutilised, Business Standard reports. Production capacity reached 500 million units by 2024, but actual output lags at 250 million. Feature phone shipments plummeted 14% in FY24, while smartphone growth stagnated. PLI giants like Foxconn and Dixon lead, but smaller firms like Lava struggle. Despite setbacks, industry experts see potential as global demand may rise post-2025. Investments have surpassed targets, with iPhone makers driving growth and expanding capacity to meet export demand.

—🏦 The Reserve Bank of India (RBI) eased restrictions on several Non-Banking Financial Companies (NBFCs) on Thursday after they addressed compliance issues related to exorbitant pricing and regulatory violations. Key NBFCs like Asirvad Micro Finance, DMI Finance, and Navi Finserv had faced curbs in 2024 for practices such as "usurious" pricing. Restrictions on Edelweiss Asset Reconstruction Co. and ECL Finance for "evergreening" distressed loans were also lifted after reforms. Although the easing of these restrictions may indicate improvements in compliance, the RBI is likely to keep a close watch.

—❌ While Nadella may have said that AI will only boost the productivity of human jobs, a Bloomberg Intelligence survey has found that global banks may cut up to 2,00,000 jobs in the next five years as AI takes over human tasks. Tech officers who participated in the survey predict a 3% workforce cut, with back-office and operations roles most at risk. Nearly 25% of surveyed executives foresee deeper cuts of 5% to 10%. However, many of the 93 firms that participated in the survey have reportedly highlighted that it would change the nature of jobs, rather than replace humans for those job functions. .

HOW INDIA’S ECONOMY WORKS 

Future And History Of India’s Rupee With Bazil Shaikh

Almost all of us deal with some form of cash almost daily  — despite the digitalisation of payment. But have you ever wondered when the Indian currency, the rupee, came into existence? In India, the history of currency dates back to the 13th century, when ruler Iltutmish of the Mamluk dynasty, introduced silver tanka coins. “Over time, the coinage fell into disarray. The monetary reforms of the Delhi ruler, Sher Shah Suri, once again standardised coinage in the mid-16th century. To be precise, in 1542, the silver coin was called a rupia or rupee, drawing from the Sanskrit root of rup or silver,” Bazil Shaikh, a former official of the Reserve Bank of India and author of the book The Conjurors Trick An Interpretive History Of Paper Money In India told Puja Mehra in the latest edition of the podcast. 

While coinage fell into disarray again with the fall of the Mughal dynasty, it was the East India Company that once again standardised the rupee. India has continued with the rupee as the national currency even after Independence, of course, with multiple changes. 

But is the future of paper money and will digitalisation completely take over? 

UGHH 

L&T Chairman SN Subrahmanyan’s suggestion for Sunday work, inspired by a conversation about China’s 90-hour workweeks, has stirred yet another controversy on how much Indians should work. Comparing work cultures, he remarked, “If you have got to be on top of the world, you have to work 90 hours a week.”

However, such a stance clashes with Indian labour laws, which cap weekly work hours at 48 hours under state-specific Shops and Establishments Acts, even for IT and office workers. Employees are also entitled to at least one weekly day off. Adding fuel to the controversy, Subrahmanyan said, “What do you do sitting at home? How long can you stare at your wife? How long can the wives stare at their husbands? Get to the office and start working.”

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