Newspapers at a distribution center in New Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

BQuick On Sept. 11: Top 10 News Stories In Under 10 Minutes 

This is a roundup of the day’s top stories in brief.

1. Rupee Fall Quickens Stoking Fear

The rupee touched a new low of 72.74 against the dollar, closing marginally above that level at 72.69. Tracking weakness in the currency, bond yields rose to their highest in four years.

  • The Indian currency has fallen by more than 5 percent in the last month alone, taking the year-to-date depreciation to over 12 percent, the worst in Asia.
  • The fundamental factors behind the rupee fall remain higher oil prices, wider current account deficit and portfolio outflows.
  • While the initial fall in the rupee was welcomed by some stakeholders, markets can often overshoot and that is what appears to be happening now.
There is a school of thought for policy authorities to hold back on “intervening” in the markets, allowing the rupee to find its own level. We do not agree. Unfortunately, financial markets, particularly forex markets, are prone to overshooting, and sharp moves can create multiple problems for companies, particularly liquidity.
Saugata Bhattacharya, Chief Economist, Axis
  • The relentless slide also has analysts rushing to rework their forecasts. Lenders including DBS Bank Ltd. are now predicting it will slide to as weak as 75 per dollar.
  • In the bond markets, the benchmark 10-year bond yield spiked to 8.17 percent.

Find out more about the rupee's fear factor.

2. Currency Fears Hit Indian Equities; U.S. Shares Volatile

Selling pressure continued across Indian markets, from currencies to equities and bonds, as the perception of risk increased and traders speculated on the consequences of a sharply weaker Indian rupee.

  • The S&P BSE Sensex Index fell 509 points or 1.34 percent to close at 37,413.
  • The index has dropped over 3 percent so far in September.
  • The correction has been different than the previous falls of 2018, in that the stronger and more stable stocks have declined.
  • The top losers this month have been the likes of Hindustan Unilever Ltd., Bajaj Finance Ltd., Titan Company Ltd. and ITC Ltd.
  • Yet, none of these companies have sounded bearish about business prospects in the recent quarter.

Follow the day's trading action here.

Most U.S. equities pared opening losses as investors ignored renewed concern over trade relations among the world’s two biggest economies.

  • China will ask the World Trade Organization for permission to retaliate against the U.S. due to its failure to modify anti-dumping methodologies, the WTO said.
  • The S&P 500 Index and Dow Jones Industrial Average were little changed, while the Nasdaq Composite crawled back into positive territory.
  • The Bloomberg Dollar Spot Index advanced 0.2 percent.
  • West Texas Intermediate crude climbed 0.3 percent to $67.71 a barrel, the first advance in a week.

Get your fix of global markets update here.

3. What India Didn’t Learn From The Global Financial Crisis

Why are monetary and fiscal policies still based on the belief that India is a closed economy, asks JPMorgan’s Chief Emerging Markets Economist Jahangir Aziz.

  • India is far more open than is believed to be. Every time the world sneezes, India catches a cold. It happened in 2008, 2013, and it is happening now.
  • India’s consolidated fiscal deficit has actually risen from 7 percent of GDP in 2013-14, the year of the taper tantrum, to 7.3 percent of GDP in 2017-18.
  • Just as it is important to provide unstinted and early policy support when hit by a shock, it is equally crucial to temper the support when the impact begins to dissipate.

Here’s how India paid the price for policy laxity.

4. ArcelorMittal Adds Another Twist To Essar Steel Saga

After the order from National Company Law Appellate Tribunal on Sept. 7, ArcelorMittal had only till today to repay dues worth Rs 7,000 crore in Uttam Galva Steels Ltd. and KSS Petron Ltd. to become eligible to bid for Essar Steel Ltd. But yesterday, the Luxembourg-based steelmaker sent a letter to Essar Steel creditors, adding a twist to the offer. BloombergQuint has reviewed a copy of the letter.

  • In its letter, ArcelorMittal points out that it firmly believes that the company is not liable to pay for the dues of Uttam Galva and KSS Petron.
  • ArcelorMittal is essentially asking the lenders to either take the entire revised offer and declare them the winning bidder, or risk the Lakshmi Mittal-led company winning the eligibility question at the Supreme Court and miss out on the Rs 7,000-crore repayment.
  • As such, at a meeting yesterday, the committee of creditors decided that they will wait for the Supreme Court to take the final decision on the eligibility of both ArcelorMittal and Numetal before they decide on the highest bid, said a person present at the meeting requesting anonymity.

Also read: Mittal's Good Essar Show Mired in Legal Farce

5. More Billion-Dollar Tech Deals Coming

India’s technology industry will see more billion-dollar acquisitions as the next big battleground for foreign internet companies, according to boutique advisory firm Raine Group LLC.

  • The e-commerce, financial technology and emerging media sectors will see strong deal activity, said Gaurav Mehta, the Mumbai-based country head at Raine, which advised on India’s two biggest tech deals this year.
  • Companies have started to see the logic of consolidation even in high-growth markets like India, Mehta told Bloomberg News.
“For a number of years, global strategics sat on the sidelines,” he said. The “realisation is setting in that India is too strategic a market to be underweight.”

Here’s why global investors are increasingly drawn to deals in India.

6. Indian Firms Rush For Samurai Loans

Indian companies lured by Japan’s near-record low interest rates and easier availability of funds are raising the most yen-denominated loans in more than a decade as dollar lenders turn cautious.

  • While Samurai loans still make up only a small portion of Indian firms’ total foreign-currency facilities, coming to more than 6 percent this year, they are growing in importance for borrowers.
  • Power Grid Corp. and Indian Railway Finance Corp. are seeking such debt, adding to $846 million worth of yen syndicated loans raised by domestic companies this year, people familiar with the matter said.
  • That’s the most since the same period in 2006.

Here’s how cheaper swaps and low rates are lure Indian firms to Japan.

7. YV Reddy On The Search For A New Normal

Amidst the chaos unleashed by the collapse of Lehman Brothers in September 2008, began the debate. Is the global monetary system broken? Is the de-facto reserve status of the U.S. dollar a problem? Do multi-lateral institutions like the International Monetary Fund need strengthening and reform?

  • A decade later, has that intellectual debate in the aftermath of the global financial crisis yielded any meaningful change?
  • “That is something which is being missed in the debate right now,” said former RBI governor YV Reddy in an interview with BloombergQuint.
The real question is whether there has been any progress on arriving at the new normal after the crisis....it has not happened.
YV Reddy, Former Governor, RBI
  • Reddy added that there has not been any significant reform of institutions like the World Bank and the IMF.
  • Pointing to the recent instances of trade tariff wars and the possibility of currency wars, Reddy noted that these cannot be divorced from the consequences of the global financial crisis of a decade ago.

Here’s more from YV Reddy on the global financial crisis and its aftermath.

8. Beware Of MSME Lending: Raghuram Rajan

The Small Industries Development Bank of India-run credit guarantee scheme for medium and small enterprises is a growing contingent liability and needs to be examined with urgency, former RBI Governor Raghuram Rajan said in a 17-page note to India’s Parliamentary Estimates Committee.

Both MUDRA loans as well as the Kisan Credit Card, while popular, have to be examined more closely for potential credit risk. The Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a growing contingent liability and needs to be examined with urgency.
Raghuram Rajan, Former Governor, RBI 
  • The parliamentary panel, headed by BJP's Murali Manohar Joshi, has been tasked with identifying the reasons behind India's nearly Rs 9 lakh crore bad loan pile.
  • Rajan also flagged off setting "ambitious credit targets" and waiving loans. "Loan waivers, as RBI has repeatedly argued, vitiate the credit culture, and stress the budgets of the waiving state or central government," Rajan wrote.

Here are highlights from Rajan's note to the panel.

9. Coming Soon: Common Platform For Online Auctioning Of Defaulters’ Property

The government has advised banks to start a common platform for auctioning defaulters’ seized properties to attract competitive bids and increase recoveries from sale of such assets.

  • Public sector banks, along with the Indian Banks’ Association, are steering the initiative to launch an e-auction website or platform which will have standardised details of all auctionable properties of banks, Financial Services Secretary Rajiv Kumar told reporters.
  • The platform, he said, may be ready in two-three months.
  • Banks display auction information on their own websites and it’s inconvenient for bidders to access information on multiple websites.
  • This leads to a smaller pool of potential bidders, cartelisation, as well as involves costs for conducting repeated auctions, according to the statement from Department of Financial Services.

Here’s how the common platform will help.

10. Trump Says India Wants A Trade Deal

India wants a trade deal with the U.S., according to President Donald Trump.

  • “Frankly, I'll tell you, India called us the other day. They said they would like to start doing a trade deal, first time,” Trump said without mentioning who called up whom.
  • “They wouldn't talk about it with previous administrations. They were very happy with the way it was,” Trump told his supporters in South Dakota.
  • Trump wants to stop the subsidies that growing economies like India and China have been receiving.

Trump says he has become friends with Narendra Modi.