The RBI may hold the repo rates till March 2019 according to a report put out by Singapore based DBS Bank. The RBI had raised repo rates in two tranches in June and August policy meets but had chosen to maintain status quo in October. According to DBS, the status quo may continue in its December and February policy too. With food inflation going into negative territory, the CPI inflation is well within the RBI comfort zone of 4% and the rupee has also strengthened from around the 75/$ levels to around 71/$. RBI is also worried as even blue chips are borrowing at 200 bps higher this year.

With a view to recovering the dues from Cairn in the 10-year-old capital gains default case, the Income Tax department has sold most of its Cairn holdings to recover part of its dues. The total dues are close to Rs.10,240 crore as claimed by the government. This claim was made based on the retrospective tax based GAAR rules that were introduced in 2012, before being put on hold. Cairn had held a 4.95% stake in Vedanta which the government had attached at that point of time and has been gradually recovering the dues from this stake. The share of the IT department has fallen to under 1%.

After the opposition to the Arcelor / Essar NCLT bid came in from operational creditors led by GAIL, now Standard Chartered Bank has also approached the Ahmadabad bench of the NCLT seeking to reject the resolution plan of Rs.42,000 crore made by Arcelor Mittal for Essar Steel. While the Committee of Creditors (COC) had approved the sale, Standard Chartered had registered as a dissenting financial creditor. According to SCB, they had been discriminated against as the core committee had been formed within the COC consisting of four banks, which had privately negotiated the deal.

With the US-China trade relations souring, China may now be looking seriously at improving its trade relations with India in a much bigger way. For example, Chinese refiners may be looking to buy an unprecedented amount of raw sugar from Indian mills. While China and the US plan to meet on the sidelines of the G-20 Summit at Argentina, the trade relations are unlikely to get repaired in the near future. However, China itself has a large stockpile of nearly 7 million tonnes of sugar and hence the orders to India may not be too big. However, it could be a symbolic start to India-China relations.

In a subtle move, SEBI urged mutual funds to seek more information before investing in commercial paper (CP). In the last few months, this issue had come to the fore with many mutual funds forced to take large write-offs on their IL&FS CP holdings after the company began defaulting on loans since August this year. According to SEBI, the companies need to make their asset-liability mismatch position a lot clearer to mutual funds at the time of issue of CP. Many corporates and N

BFCs have aggressively used the CP route, which is a short-term borrowing route for raising money. The problem is that when long-term assets are funded they create a mismatch. The IL&FS default had led to a run on all NBFCs where such a mismatch was suspected. MFs may have to increase scrutiny now. The Asian liquidity squeeze is now being seen as the worst since 2008 when the financial crisis last struck the global financial markets. Central bank currency supply in AEJ (Asia ex-Japan) has shrunk by 7% even as Japan continues to keep its printing presses running. Normally the two occasions when this was seen in the recent past was in 1998 and in 2008 and had resulted in a crisis on both occasions. IN 1998 it was the Asian crisis and in 2008 it was the Lehman crisis. Asia has seen tightening due to the consistent unwinding of capital flows from FIIs.