Dawn of 18th Feb 09

INR free fall on NDF arbitrage, RBI sold $3.1 billion in Nov and only $318 million in Dec, Eastern EUR Recession, Yields rise on supply, OMO buy back announcement on Wed. after market.

Recession deepens in East Europe, US manufacturing recession is worsening, Gold Shines OIL Slips

DLF to sell company to PE, DLF Bangalore re launched, Federal Mogal to down size by 1900.

Rupee
INR dropped sharply to 2M lows on Tuesday as banks bought USD in the spot market to arbitrage NDF, while shares shed 3 %, sparking fears of FII outflows. INR closed at 49.67/68, 1.7 % weaker from Monday’s close of 48.84/85. 1M NDF was quoting at 50.08/18, weaker than the onshore spot rate. RBI sold $318 million in intervention in December, sharply lower than $3.1 billion it sold in November, as INR pulled back from a slide.USD strength overseas also hurt INR. The USD rose broadly while the euro hit a more than two-month low on Tuesday, pressed by concerns over a recession in Eastern Europe and the knock-on effect on European banks.

Bonds
Yields rose to 2M high on Tuesday as uncertainty over how the RBI would fund government borrowing weakened appetite for debt. Yields later eased as traders bought liquid bonds expecting the RBI to buy them back at open market operations (OMO), 8.24 % 2018 closed at 6.48 %. its previous finish of 6.42 % but below an intraday high of 6.57 %, its highest since Dec. 11. RBI will announce the details of its first open OMO market operation on Wednesday after market hours.

Stocks
Dropped for a second day on Tuesday, falling 2.9 % to their lowest close in three weeks, as weak world markets added to the gloom caused by the absence of a stimulus for the industry in Monday’s budget.

Call
Rates ended flat on Tuesday after remaining slightly higher intra-day on demand from banks, which secured funds to meet reserve needs. Rates closed at 4.00.15 %, unchanged from Monday’s close. Banks parked 409.25 billion with the RBI at its rev. repo.

Global
Ø DJIA 7,552.60 -297.81 Nikkei 7,554.65 -90.86 FTSE 4,034.13 -100.62 H Seng 12,828.89 -116.51 US10Y 2.636 -0.259 EUR 1.2604 Yen 92.09 Gold 968.00 Crude 34.95

Ø U.S. stocks tumbled on Tuesday with the S&P 500 and the Dow industrials closing at near 3M lows, as regional manufacturing data signaled the recession is worsening while fresh worries about European banks underscored the global nature of the downturn.

Ø FTSE fell 2.4 % on Tuesday, retreating for the fourth day in a row, as banks and commodity stocks tumbled on concerns over a worsening global recession.

Ø Nikkei stock average fell 1.2 % on Wednesday and touched a 3M intraday low at one point, as worries about a deepening U.S. recession and European bank troubles hit financial and property firms.

Ø USD gained broadly on Tuesday, hitting a 10-week high against the euro after warnings from two ratings agencies sparked fear that a deep recession in eastern Europe would cause further damage to euro zone banks.

Ø U.S. gold futures rallied more than 3 % to a 7M high on Tuesday as risk averse investors sought safety in the yellow metal after two reports warned of deepening recession in eastern Europe, Japan’s economy shrank, and U.S. manufacturing activity sank.

Ø U.S. oil prices fell nearly 7 % to below $35 a barrel on Tuesday as grim economic indicators battered markets and raised concerns about slumping demand.

India Front Page
Ø Big banks are fixing a floor on loans disbursed below their benchmark prime lending rates to protect margins.

Ø PE funds, including Blackstone and JP Morgan, are in discussions with founders of r, DLF , for a majority stake in affiliate company, DLF Assets. The deal will fetch DLF Assets around $400-$500 million.

Ø Institutional investors have moved the SEBI & and the Department of Corporate Affairs, objecting to the sale of the IT arm of India’s Siemens Ltd to its German parent, Siemens AG .

Ø Private steel, mining, oil and cement companies may be allowed to to set up captive cargo handling berths at the 12 major ports in India, to use port facilities for importing raw materials and exporting finished products.

Ø The aviation ministry has allowed Delhi International Airport Pvt Ltd to raise airport charges by 10 %. Airline firms pay a fee that includes landing and parking charges.

Ø DLF Ltd has decided to re launch its maiden Bangalore project in a different format and has reduced prices for the second time in three months by a third. Apartment sizes have also shrunk.

Ø Auto-parts maker Federal Mogul Corp plans to retrench over a third of its 1,900-odd employees at the Bangalore plant of its Indian subsidiary, Federal-Mogul Goetze.

Ø Reliance Industries has written to the federal petroleum ministry, citing an ongoing litigation with NTPC that it would be inappropriate to supply gas to the state-run NTPC’s power plants from the gas allocated by the Empowered Group of Ministers to existing gas-based power plants in the country.