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Good morning. In today’s edition: India’s role in the rise of tech giants like NVIDIA; a shift towards resilience for Indian markets; and fast moving consumer goods (FMCG) companies have a problem at hand.

THE TAKE

How India’s Talented Engineers Have Powered The Rise Of Companies Like NVIDIA 

Sunil Nanda, a BITS Pilani graduate, founded the India design centre for NVIDIA Graphics in Bengaluru in 2004, just 11 years after the company was founded in 1993 in the US. A job description I found from that period said NVIDIA was looking for talented people passionate about the visual computing industry. 

“We want individuals who are highly motivated and strive for perfection in their work. If you want to be part of a company that is shaping every pixel on millions of screens across the world, come join us,” the advertisement said.

By the time NVIDIA’s design and engineering centre came up 20 years ago, chip giant Intel had already been present in the city for about five to six years. Intel was the big brand and draw, including for journalists like me who chased visiting Intel brass for interviews. Not many cared for NVIDIA except for the tech and gaming media. After all, it was just a gaming chip.

Intel’s largest engineering site outside the US today is in India and it has over 13,000 employees, of which 90% are engineers. NVIDIA’s presence in the country is sizable too, but smaller in absolute numbers, being a smaller organisation as well. Founder Jensen Huang is presently visiting India and getting a rockstar treatment, being feted across events and appearances, as he is elsewhere in the world. 

Thousands turned up to see him and thus delayed an event featuring him in Mumbai on Thursday. 

Until quite literally a couple of years ago, Jensen Huang’s visits to India would have been largely unnoticed except by tech media. 

A $3.4 trillion dollar market capitalisation number, in the breathing distance of Apple, obviously has changed many things. It is also a reminder of how rapidly things change in the technology world.

Intel, the ruler in the chip space for decades, has lost its pre-eminent leadership position thanks to the shift to high-performance artificial intelligence (AI) chips and NVIDIA’s rapid dominance in that space. Reports in August suggested Intel would lay off some 15,000 people even as talk of the company being acquired surfaced, an unthinkable proposition a year ago.

What Was India’s Role? 

India has played a role in the global rise of these companies as well. Intel and NVIDIA arrived in Bengaluru more than two decades ago because they saw potential in India’s engineers as much as the market where they both sold their products. On both counts, India has served the global technology industry well. But tomorrow’s winners will typically arrive quietly today and only if they see raw potential, as these chip companies did once.

When NVIDIA’s first key India hire Nanda started with a little over a hundred colleagues, the company was looking for talented people passionate about the visual computing industry. Today, people don't speak of its gaming chips but rather about its dominance in AI, another reflection of the pace of technology and how companies pivot over the years.

"We know from experience that India is home to some of the world's brightest engineers, as many of our top employees today are originally from there. India is strategic to NVIDIA and we are delighted to become a member of the Bangalore community," Huang had said in 2005. 

He could well be making the statement today. That is a good reassurance and reminder of India’s strengths and in some ways challenges ahead, if it has to stay relevant in the global technology race.

CO:RELATIONS

Paradigm Shift In Indian Markets

A foreign portfolio investor (FPIs) selloff of over $10 billion in October 2024 should have taken benchmark indices down significantly. In 2013, a mere $4 billion selloff spread over three months made Indian stock market indices skid 10%. Indian equities reacted to the so-called ‘US taper tantrums’ then. The US decided to unwind bond repurchases and tighten liquidity in the financial system. The impact was felt across financial markets like equity, debt and currency. This time, the story is different. Domestic institutional investors absorbed the supply from FPIs to the tune of $9 billion. In 2013, mutual funds could barely compete with FPIs. 

For a country with a market cap of $5.6 trillion (around $1 trillion in 2013), it is no longer an issue of concern due to strong domestic flows. There is more foreign money in bond markets than ever, and the rupee is relatively stable. India’s deepening financial markets ensure that Indian shares are unlikely to dance to the tune of foreign capital flows. The downside is not significant unless companies perform poorly and miss estimates. The current trend for the September 2024 quarter shows minor misses by large companies. If share prices are falling, they are probably reacting to fundamental company-specific issues with earnings. Keep an eye on the management commentary on business and profit outlook.

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CORE NUMBER

58.6

This is HSBC's flash India Composite Purchasing Managers' Index (PMI) in October which rose from a 10-month low of 58.3 in September, signalling a slight rebound in the private sector. According to S&P Global's survey, manufacturing demand strengthened, driving job creation to its fastest pace since February 2006. The index has remained above the 50-mark, separating growth from contraction, for 39 months, The Business Standard reported. Manufacturers outpaced service providers in output and sales growth, while input costs and prices increased faster. Final PMI figures will be released in early November.

FROM THE PERIPHERY

—📉 Indian FMCG companies are expressing concerns about a potential decline in demand, particularly in urban areas, due to rising commodity prices and muted consumer sentiment.  Despite reporting high single-digit volume growth for toothpaste and double-digit growth for toothbrushes in Q2, oral hygiene firm Colgate-Palmolive anticipates continued market challenges. Nestle India MD Suresh Narayanan also highlighted a challenging environment, muted demand, and high commodity prices impacting sales. Several companies, including Pidilite and United Spirits, reported lower-than-expected volume growth. Factors contributing to the slowdown include a shrinking middle class, food inflation, and flooding. 

—🧾 Sajith Sivanandan, head of Disney's Hotstar in India, has resigned amid ongoing business integration following Disney’s $8.5 billion merger with Reliance’s media assets, sources revealed. The resignation comes after a decision to stream all live sporting events, including IPL, on Hotstar rather than Reliance’s JioCinema. Leadership has yet to decide on JioCinema’s future as a standalone app. The merger, valued at around Rs. 70,000 crore, was approved by the Competition Commission of India (CCI) and gives Reliance a 56% stake in the entity, with Disney retaining 37% and investment platform Bodhi Tree Systems holding 7%.

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