After a bounce last week, the Nifty is back in sell mode. Nifty fell by (-99) points on Monday to 11,279 on PSU merger worries. A day after the merger of BOB, Dena Bank and Vijaya Bank, the banking stocks reacted negatively. The BOB stock was down more than 17% while SBI led the Nifty down sharply. Government hinted at more such mergers, which actually spooked the markets. The markets were also hit by the sharp sell-off in the rupee. Banking, auto and realty stocks were among the worst hit. Apart from Hindustan Unilever and ONGC, most of the other Nifty stocks came under pressure.

The trade war appears to be getting worse for the time being. Even as the US tariffs kick in, China retaliates with tariffs on US goods worth $60 bn. After showing some signs of petering out, the trade war took a turn for the worse after China also imposed retaliatory tariffs to the tune of $60 billion on US imports. This is in response to Trump’s decision to penalize Chinese imports to the tune of $200 billion. Markets fear that a protracted tariff war could result in a slowdown in growth across global economies. Jackie Ma expects the trade war to continue for a full 20 years.

Currency woes were back on the street even as yields hardened on Tuesday. Rupee weakened to all-time low of 72.966/$ and 10 year bond yields closed at 8.14%. The rupee fell sharply in the last couple of hours to a new historic low on Tuesday even as the bond yield shot up in late trades. The trade war did show signs of abating, but with neither the US nor China willing to let go, EMs took the brunt of the hit. Even the bond yields, that were tepid in the first half, hardened sharply in the latter half of trading. The weekend package to rescue the rupee was largely disappointing.

It appears to be the end of the road for the telecom business for the ADAG group. RCOM plans to log out of the telecom business altogether. Post the deal to sell all its assets to Reliance Jio, RCOM has decided to exit telecom altogether and focus purely on the real estate business. Anil Ambani clearly stated that with the current level of price war in the industry, it would be difficult to sustain profitability in the industry. The real estate foray will include redevelopment of its 133 acre Knowledge Centre in Navi Mumbai. It remains to be seen if RCOM can add value in this particular space.

The SEBI board meeting was significant in more ways than one. To quell the worries over FPI outflows, SEBI has agreed to dilute the provisions of the April circular pertaining to NRI ownership in FPIs. In addition, SEBI has also proposed an across-the-board cut in mutual fund expense ratios by lowering the base of the range. The IPO timeline will also be compressed from T+6 days to T+3 days along with permitting IPO applications via UPI. SEBI took major steps towards fair market conduct of players To begin with, the Unfair Trading regulations will now include employees and intermediary agents also. The definition of fraud has been expanded to include misleading information on digital media, front running by intermediaries, mis-selling of securities, misuse of client funds, manipulating benchmarks etc. SEBI may also look to intercept calls for better monitoring.

The problems at IL&FS appear to be mounting by the day. IL&FS rating was cut to the lowest possible grade as debt woes mount. Both ICRA and CARE cut their ratings on IL&FS debt to the lowest possible level of “D” on most of its debt instruments. This is indicative of an imminent default by IL&FS. It has already been defaulting on its ICDs to SIDBI and has a shortfall of nearly $500 million on the liquidity front. The bigger worry is its $12.5 billion debt which counts among the who’s who of institutions as its investors. With a 25% stake with LIC, the IL&FS fiasco remains a systemic worry for India.