Dawn of 3rdMarch09

Opens at 51.80INR Rhetoric low: 52 or 51.95, NDF arbitrage, RBI intervention, Trade Deficit narrows, Bonds rise on RBI buyback, Stocks Gloomy, Rate Cut – when? SGX Nifty – +6

AIG quarterly loss at 61.7 billion $, HSBC Deep Discount rights issue, global markets fall, OIL slips 10%

Tata Motors may sell Tata Technologies for funds

Rupee
INR dropped to a record low on Monday as falling stocks, weak data, bearish global markets and an arbitrage play with NDF drained demand despite suspected RBI intervention. INR closed at 51.90/92 sharply down from 51.10/12 on Friday. The INR fell 1.5 % on the day, taking its losses to 6.2 % in 2009. It fell as far as 52 per $ according to Reuters data, although dealers said it was likely to have been a mishit that could be reversed later. They put the trough at 51.95, which was still a record low. Those with $ loans, ECBs and who are unhedged are scrambling to cover after 50.65 broke,” a senior dealer with a private bank said. Dealers said state-run banks likely sold between $500 to $800 million to stem the INR’s fall. 1M

NDF contracts were at 52.28/38, weaker than the spot rate. The U.S. data on Friday reminded everybody about the extent of the global economic situation and that has triggered a sell-off in markets. And even though India may not have much exposure to the world, it is not an island,” said Nizam Idris,

currency strategist with UBS in Singapore. Still, the trade deficit narrowed to $6.1 billion in January from $7.6 billion in December as import values dropped 18.2 %, mainly due to the sharp fall in oil prices.

Bonds
Yields fell on Monday after the RBI increased the size of its buyback auctions. 824 % bond maturing was at 6.28 %, below Friday’s close of 6.34 %. It had risen to 6.40 % in intra-day trade. After market hours on Friday, the RBI said it would buy back 60 billion INRs ($1.2 billion) of government bonds with an option to buy back another 30 billion on March 5. . At its last auction on Feb. 19, it bought back only 50 billion of bonds. Yields rose on opening as some market participants were disappointed with no rate cuts over the weekend. Expectations of a rate cut have been building after government data on Friday showed disappointing growth data.

Stocks
Fell 3.2 % on Monday to their lowest close in more than 3M as bleak economic data and sliding world markets added to the gloom, while the INR slumped to record lows. Reliance Industries India’s largest-listed firm, shed more than 3 % as investors viewed the energy giant’s share swap ratio to absorb its unit as favorable to Reliance Petroleum shareholders, although the move is seen helping the company in the long run. Manufacturing in India shrank for a fourth straight month in February as the global downturn hurt demand and soured business sentiment, a survey showed.

Call
Rates were hugging the bottom of the RBI’s liquidity corridor on Monday due to ample cash surpluses in the money market. Rates ended 4.00/10 %, unchanged from Friday’s close. It had ended at the same level in an illiquid market on Saturday. Some dealers expect tax payments by companies to drain 150-250 billion from the system at least for a fortnight. Banks parked 425 billion with the RBI at its operations on Monday.

Global
DJIA 6,826.85 -236.08 Nikkei 7,204.89 -75.26 FTSE 3,625.83 -204.26 H Seng11,956.19 -361.27

US10Y 2.901 -0.120 EUR 1.2585 Yen 97.51 Gold937.25 Crude 40.22

Ø U.S. stocks extended their sharp losses on Monday as insurer American International Group , which posted a record $61.7 billion quarterly loss, was bailed out with government money again, fueling fears that the global financial crisis is worsening.

Ø FTSE slid 5.3 % on Monday to its lowest closing level in nearly six years, led by financials after HSBC’s plan of a deep-discount rights issue and AIG’s huge quarterly net loss.

Ø Nikkei stock average touched a four-month low on Tuesday but later pared losses to 1 %, with banks such as Mizuho Financial Groupdown on fear about the U.S. financial system after AIG posted huge losses.

Ø $ soared to a 3Y high on Monday after a record loss for insurer AIG added to worries that the financial crisis is growing more severe and enhanced the U.S. currency’s safe-haven appeal.

Ø Gold erased its earlier gains and dropped 1 % on Monday, heavy losses in equity markets triggering profit-taking after the metal failed to climb further above $1,000 an ounce last week.

Ø Oil prices dropped more than 10 % on Monday as a deteriorating world economy threatened to cut further into fuel consumption and made OPEC’s tight compliance with supply curbs look insufficient.

India Front page
Ø Tata Motors is considering selling a significant stake in unlisted group firm, Tata Technologies, to raise about $100 million to help fund its financial needs and is in talks with private equity firms including General Atlantic.

Ø Moser Baer India’s photo voltaic unit plans to enter the U.S. market and expand its presence in Europe by the end of the year.

Ø LIC has dropped embattled Satyam from the list of vendors for a key project.