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Rupee crashes to all-time low of 69 per dollar before slight recovery; may touch 72 by year-end

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Rupee crashes to all-time low of 69 per dollar before slight recovery; may touch 72 by year-end

The rupee crashed to an all-time low of 69.0925 against the US dollar on Thursday, June 28 morning, past its previous record of 68.8650 reached in November 2016.

The rupee later recovered partially to 68.91 at around 11 am against the US dollar on suspected Reserve Bank intervention, said media reports. Some analysts who foresaw little scope of a turnaround soon said the rupee may cross 70 per dollar and touch 72 by year-end.

The fall came as rising crude oil prices triggered worries about the further rise in the current account deficit and inflation, reported The Indian Express.

The rupee also came under additional pressure from huge capital outflows of around Rs 60,000 crore from the capital market since April 1 this year, the IE report said.

Foreign investors pulling out funds from India and crude oil prices moving upwards have led to the Indian currency losing around eight per cent this year, said the report.

World’s third biggest oil consumer, India relies on imports to meet about two-thirds of its fuel needs, making it one of the most sensitive in the region to advances in oil prices.

“Given India’s current-account deficit, there is a need to fund it, but we are on track for a fifth consecutive month of bond outflows and the equity market has also been experiencing outflows,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore, reported IE. Without a turnaround, the rupee may weaken past 70 per dollar, he said.

Overseas investors have reduced holdings of rupee-denominated government and corporate bonds by $6.1 billion, and pulled $785 million from equities since the beginning of 2018. The withdrawals have made the rupee the worst-performing currency in Asia, spurring analysts to put out bearish forecasts.

Barclays Plc now predicts the currency at 72 by year-end, while DBS Bank Ltd. sees 71 to a dollar by June 2019, said the IE report.

“Rising crude prices are a drag on the Indian economy and fuel inflation concerns, as it’s a major driver of our current account deficit. India imports around 80 per cent of its crude oil requirements and higher crude oil prices risks widening India’s current account deficit, adding inflation risks,” said IE, quoting an analyst with Religare Broking.

India’s assets are caught in a vicious downward spiral, where capital outflows hurt the currency, further deterring investments. Concerns about the government’s debt sales and the impact of rising crude prices have on inflation have led to a bond selloff at time when investors are also pulling out of emerging markets because of higher Treasury yields.

Oil prices rose to their highest level since November 2014 on Wednesday after a bigger-than-expected drop in US crude stockpiles added to a rally fueled by a major Canadian supply outage, concerns about Libya’s exports and stepped-up efforts by the Trump administration to disrupt Iran’s petroleum exports by pressure on its allies to halt purchases of Iranian supplies.

Analysts said persistent weakness in the Chinese yuan also dragged down emerging market currencies, including the Indian rupee, amid escalating trade tensions. There is “risk off” environment as investors are waiting to see the next development in the trade tussle involving the US and China. “The domestic currency is leading the decline in the region and is not far from its record-low,” Religare said.

According to analysts, capital outflows of around Rs 19,500 crore from the equity market and over Rs 40,000 crore from the debt market since April this year have put severe pressure on the rupee.

The rupee fall is expected to make imports – especially oil — costlier and exports more remunerative. Tech companies are expected to reap a windfall from the rupee depreciation.

India’s foreign-currency reserves have fallen in eight of the nine weeks to June 15, suggesting the central bank has been intervening to stem the pace of the currency’s decline. State-owned banks are probably selling dollars and buying rupees on behalf of the central bank, two traders from local lenders said Thursday, citing price action.

The RBI also raised its key rate earlier this month, joining other emerging economies like Indonesia and Philippines, who have tightened to defend their currency.

Earlier this month, on June 6, the RBI had increased the key policy rate – Repo rate – by 25 basis points to 6.25 per cent for the first time in four years. Headline inflation has been sharper than anticipated, and has remained above the 4 per cent target for six consecutive months, the RBI had said. A week later, on June 13, the US Federal Reserve had raised its policy rate by 25 basis points.

The sentiment in the forex market is expected to remain jittery ahead of the (US government) report on Chinese investments due Friday, and the July 6 deadline for tariff imposition.

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Jio partners with SpaceX to bring Starlink broadband to India

Reliance Jio and SpaceX have partnered to bring Starlink broadband services to India, enhancing digital connectivity in remote areas.

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Elon Musk

Reliance Jio has announced a strategic partnership with SpaceX to introduce Starlink broadband services in India, a move aimed at improving internet accessibility, especially in remote and rural regions. The deal will enable Jio to leverage SpaceX’s low-Earth orbit (LEO) satellites, enhancing its existing broadband services like JioAirFiber and JioFiber.

Under this collaboration, Starlink equipment will be available at Reliance Jio stores across the country, subject to regulatory approvals. Customers will also have access to installation, activation, and support services provided by Jio.

Boosting India’s digital connectivity

The partnership aligns with Jio’s goal of ensuring high-speed internet access for enterprises, small and medium businesses (SMBs), and communities across the country. By utilizing Starlink’s extensive satellite network, the initiative is expected to bridge connectivity gaps in difficult-to-reach locations.

Gwynne Shotwell, President and COO of SpaceX, welcomed the partnership, stating, “We are looking forward to working with Jio and receiving authorization from the Government of India to provide more people, organizations, and businesses with access to Starlink’s high-speed internet services.”

Regulatory approvals and future collaborations

While the partnership is a significant step, Starlink’s services in India still require clearance from regulatory authorities. Once approved, Starlink broadband services will be available for purchase and activation through Jio’s distribution network.

Additionally, Jio and SpaceX plan to explore other complementary areas of cooperation, utilizing their infrastructure to further strengthen India’s digital ecosystem.

This development follows SpaceX’s recent agreement with Bharti Airtel, which also intends to sell Starlink equipment and provide connectivity solutions to business customers, schools, health centers, and remote communities.

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India News

Ashok Hinduja reassures shareholders amid IndusInd Bank’s market turbulence

IndusInd Bank’s promoter, Ashok Hinduja, has assured investors of the bank’s stability, despite a sharp decline in its stock. He confirmed readiness to inject capital if required while emphasizing the strength of the bank’s financial position.

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IndusInd Bank promoter Ashok Hinduja addressing financial concerns

IndusInd Bank’s promoter, Ashok Hinduja, has assured investors that the bank remains financially strong despite recent turbulence in its stock performance. He confirmed that the promoters are prepared to inject capital if needed, reiterating confidence in the institution’s ability to handle its ongoing challenges.

The reassurance follows a sharp decline in IndusInd Bank’s stock, which plummeted 26% on March 11, wiping out nearly Rs 18,000 crore from its market capitalization. The drop was triggered by concerns over discrepancies in the bank’s derivatives portfolio, which is expected to have a 2.35% impact on its net worth.

“Shareholders need not panic”

Speaking to the media, Hinduja emphasized that the bank remains in a strong financial position.

“Shareholders need not panic. These are routine issues. I understand the concern regarding the delay in communication, but banking is built on trust and integrity,” he stated.

Hinduja also reaffirmed confidence in the bank’s leadership, noting that IndusInd Bank has successfully navigated various challenges over its 30-year history.

“We’ve seen IndusInd Bank through various challenges, and they have been handled effectively. This issue, too, will be resolved,” he added.

Capital adequacy remains strong

Despite the market reaction, Hinduja reiterated that the bank remains well-capitalized. He clarified that while the promoters are willing to inject fresh capital if necessary, the bank’s capital adequacy ratio stands above 15%, and there is currently no immediate concern.

“If there’s a need for capital raise, the promoter is ready to inject funds. We are awaiting approval from the regulator. However, as of now, the bank’s capital adequacy ratio is above 15%, and there are no concerns.”

Market reaction and leadership concerns

The decline in stock value was further exacerbated by brokerages downgrading IndusInd Bank following the Reserve Bank of India’s (RBI) decision to approve a one-year extension for MD & CEO Sumant Kathpalia—shorter than expected.

On March 10, IndusInd Bank disclosed that an internal review had revealed discrepancies in its derivatives portfolio, which could impact its net worth by approximately Rs 1,500 crore. However, the final impact is still subject to an external review.

Hinduja assured that the bank’s board and management are fully equipped to manage the situation, adding that similar challenges have been faced by banks worldwide.

“The board and management are capable of resolving these issues,” he stated.

As IndusInd Bank navigates the current volatility, investors are closely monitoring further developments regarding its derivatives portfolio review and capital injection plans.

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Market crash wipes out Rs 7.46 lakh crore investor wealth as Sensex plunges over 1,000 points

The Indian stock market tumbled sharply as Sensex lost 1,032 points, wiping out Rs 7.46 lakh crore in investor wealth amid fresh U.S. tariff threats.

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Sensex crashes over 1,000 points amid Trump tariff fears

The Indian stock market witnessed a sharp downturn on Friday as the benchmark BSE Sensex tumbled 1,032.99 points or 1.38% to 73,579.44 in morning trade. The heavy selloff led to a staggering erosion of Rs 7.46 lakh crore in investor wealth, following a similar downtrend in global equities.

The primary trigger for this massive slump was renewed tariff threats from former U.S. President Donald Trump, raising fears of a fresh global trade war. Persistent foreign fund outflows further dented investor sentiment.

Market bloodbath: Tech Mahindra, IndusInd Bank among biggest losers

Several heavyweight stocks bore the brunt of the market meltdown. Tech Mahindra, IndusInd Bank, Maruti, HCL Tech, Tata Consultancy Services, Infosys, Mahindra & Mahindra, and Titan were the top losers on the Sensex.

However, a few stocks managed to withstand the storm, with Axis Bank, HDFC Bank, Reliance Industries, and Adani Ports emerging as the only gainers.

Global turmoil adds to the pressure

Asian markets mirrored the downtrend, with Seoul, Tokyo, Shanghai, and Hong Kong all trading deep in the red. Meanwhile, the U.S. market slumped to a five-month low as Treasury yields surged in response to Trump’s tariff announcement.

Vikas Jain, Head of Research at Reliance Securities, noted that “the U.S. market fell sharply, with a significant rise in Treasury yields, following Trump’s fresh tariff threats.”

Uncertainty rattles investors as FIIs pull out Rs 556 crore

Market analysts pointed out that investors have been wary of uncertainty, which has only intensified with Trump’s return to power. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that Trump’s strategy has often involved threatening tariffs early in his presidency before negotiating favorable trade deals for the U.S.

Adding to the concerns, foreign institutional investors (FIIs) pulled out Rs 556.56 crore from Indian equities on Thursday, as per exchange data.

Crude oil prices slide as global concerns mount

The impact of global economic jitters extended to the commodity market, with Brent crude slipping 0.51% to $73.66 per barrel.

As markets brace for further volatility, investors will be closely monitoring China’s response to the latest round of U.S. tariffs, which could determine the trajectory of the ongoing global selloff.

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