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Market Ahead, September 12: Benchmark indices are likely to focus on rupee amid falling global markets
Today on Market Ahead: 1. Benchmark indices are likely to focus on rupee amid falling global markets 2. IL&FS MF's exposure under scanner; firm says in good position to repay dues 3. Co-location case: Sebi directs senior NSE officials to stay 'out of action'
Benchmark indices are likely to continue its focus on rupee amid falling global markets as the US-China trade war intensifies.
 
The sell-off in stocks, the rupee, and bonds continued for a second day on Tuesday on fears that India’s macro fundamentals could be worsening. The widening current account deficit due to rise in oil prices, weakening rupee, and expensive valuations saw foreign portfolio investors (FPIs) pull back from domestic equities.
 
Meanwhile, The rupee fell another 0.34 per cent to close at 72.70 a dollar from its previous close of 72.45, while the yield on the benchmark government bonds rose another three basis points to 8.18 per cent. On a year-to-date basis, the rupee is the worst-performing currency in Asia, falling 12.14 per cent against the dollar.
 
Globally, Asian stocks were pinned near 14-month lows on Wednesday, as investor confidence was chilled by the latest round of verbal threats in an intensifying US-China trade conflict.
 
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.05 per cent, hovering near its lowest levels plumbed since July 2017 on Monday.
 
Tokyo's Nikkei fell 0.25 per cent and Australian stocks gave up 0.3 per cent, while South Korea's KOSPI managed to eke out a modest 0.15 per cent gain.
 
The mood was dimmed by the verbal sparring between Washington and Beijing as the months-long escalation in trade tensions between the world’s two biggest economies took their toll on riskier assets.
 
 
The IL&FS group has come under scanner of the Reserve Bank of India (RBI) because of its exposure to group firms and mounting debt burden. However, sources said market regulator Securities and Exchange Board of India (Sebi) may also step in. The bone of contention is IL&FS Infrastructure Debt Fund’s (IDF) high exposure to its own group’s renewable businesses.
 
The IDF, run by IL&FS MF, has more than 30 per cent of AUM (combined exposure) in two of its schemes exposed to IL&FS Solar Power and IL&FS Wind Energy (IWEL). The IDF Series 2B has 31 per cent of its AUM exposed to non-convertible debentures of the two renewable companies. Series 2C has 30.29 per cent of its AUM exposed to NCDs of the two firms. 
 
Investments made by IL&FS IDF in group assets may have not breached regulatory norms. However, the latest episode has put a spotlight on whether such investments in group assets are being made in the right spirit.