India: Good news for INR? – TDS

Analysts at TD Securities note that in a surprising decision yesterday the Indian government took control of IL&FS the shadow banking Infrastructure Company.

Key Quotes

“The government ousted the board of this "systemically important" lender. A new plan for IL&FS will be outlined by Oct 15. This could be good news but markets may see this as a sign of concern especially given worries that problems in shadow banking could spread.”

“Separately the INR looks particularly suceptible to the rise oil prices, with higher oil working against India's efforts to reduce imports (Oil comprises 30% of India's imports). INR is unsurprisingly the most highly (negatively) correlated currency with oil prices in the region.”