OPINION, P8 ECONOMY, P3 PNB FRAUD India will be hit by Trump’s trade war, but so will the US Sugar cess a partial solution, many more reforms required, such as those in UP BREAKING POINT Nirav Modi’s firm moves Delhi HC against ED case EDITORIAL INTERNATIONAL, P16 Adviser Cohn tries to head off Trump tariffs with White House meet MUMBAI, WEDNESDAY, MARCH 7, 2018 FOLLOW US ON TWITTER & FACEBOOK. APP AVAILABLE ON APP STORE & PLAYSTORE WWW.FINANCIALEXPRESS.COM READ TO LEAD VOLUME XXXXXV NO. 299, 18 PAGES, `6.00 P U B L I S H E D F R O M : A H M E D A B A D , B E N G A L U R U , C H A N D I G A R H , C H E N N A I , H Y D E R A B A D , K O C H I , K O L K ATA , L U C K N O W, M U M B A I , N E W D E L H I , P U N E SENSEX: 33317.20 ▼ 429.58 NIFTY: 10249.25 ▼ 109.60 NIKKEI 225: 21417.76 ▲ 375.67 HANG SENG: 30510.73 ▲ 624.34 `/$: 64.96 ▲ 0.15 `/€: 80.42 ▼ 0.29 BRENT: $65.85 ▲ $0.31 GOLD: `30438.00 ▼ `50.00 TARIFF WARS 35,906.66 Feb 1, 2018 33,317.20 March 6, 2018 EU targets US shirts to motorbikes European Commission aims to apply levy on a range of consumer, steel, other goods 10,249.25 10,600 10,400 10,200 10,000 Feb 1 YOOSEF KP Mumbai, March 6 Bank Nifty INDIAN STOCKS TUMBLED nearly 430 points on Tuesday, fallingforthefifthstraightsession led by some big selling in bankingstocks.TheSensexhas lost 1,128.55 points and `4.3 lakh crore of market capitalisation in the last five sessions. Although Asian markets posted gains,ostensibly shrugging off worries about a global tradewar,Indian equities had a rough day with investors remainingconcernedaboutthe impact on banks of the fraud at Punjab National Bank (PNB). A Bloomberg report in the afternoon on the possibility of Europe imposing a 25% tariff on $2.8 billionworth ofAmerican goods triggered some late selling and sawthe Sensex and Mar 6 2018 26,800 27,500 27,220.7 24,448.45 26,100 25,400 24,700 24,000 Feb 1 Mar 6 2018 10-year bond yield 7.780 7.779 (%) 7.715 7.650 7.605 7.585 7.520 7.455 Feb 1 Mar 6 2018 Nifty shed 1.27% and 1.06%, respectively. Since January 29, when it Continued on Page 2 NIKKEI 225 Shanghai Comp 2.7 2.1 IBOVESPA 5.9 -0.3 2.1 15 * Against $ Source: Bloomberg evening in Brussels. The EU’s retaliatorylist targets imports from the US of Indo-US trade shirts, jeans, cosmetics, other consumer goods, motorbikes and pleasure boats worth around €1 billion; orange juice, bourbon whiskey, corn and other agricultural products totalling €951 million; and steel and other industrial products valued at €854 million. Trump’s vow to curb US imports of foreign steel has sparked opposition within his Republican Party and is based on a national-security argument that the EU dismisses. The White House threat risks provoking retaliation across the globe and a slew of complaints to the World Trade Organisation,which has never ruled on a dispute involving trade restrictions justified on national-security grounds. Europe has expressed growing concerns about Trump’s protectioniststanceoninternational trade. The US goods on whichtheEUintendstoapplyits own25%tariffsendsapolitical message to Washington about the potential domestic economic costs of making good on the president’s threat. Continued on Page 2 BANIKINKAR PATTANAYAK Special Feature US tax beyond steel may hurt India If theTrump administration goes beyond steel and aluminium and imposes higher taxes on gems & jewellery, textiles and garments and drugs, India will have to brace for a tough time. But any such move will prompt exporting countries to approach theWTO. Iron & steel exports ($ m) Aluminium exports Total exports to US 35,114 10,800 -0.2 1.7 3.3 -2.3 2015-16 2016-17 1,487 445 11,016.9 HANG SENG DAX 31,557 11,000 hit its recent peak of 11,171.55points,theNiftyhas yielded as much as 8.55%. Since February 1, when the UnionBudgetfor2018-19was announced, the Sensex has given up some 7%. After pumping in close to $8billionin2017,foreignportfolioinvestorsarelyinglowand havesofarinvestedonlyameagre $309 million in Indian equities in 2018; they have beensellingregularlysinceJanuary23.Domesticinstitutions, on the other hand, have been net buyers of equities worth $2.6 billion thisyear. Bankingstockswerebeaten down on Tuesday, explaining the sharper fall in the Sensex vis-a-vis the Nifty, as financial sector stocks account for 40% of its weightage. The Bank Nifty index was down 1.5%, while the BSE Bankex shed 1.44% after the Serious Fraud Investigations Office summoned the heads of all lenders to Nirav Modi and Mehul Choksi group entities, for further information on the defaulting entities and their mechanics. 3.3 1.2 -0.8 229 1,083 Nifty 50 CAC 40 KOSPI -3.1 - 0.6 2.9 42,212 Unlike Asian markets that shook off global trade war nerves, local scrips take a beating on bank sector fallout 1,594 INCOME TAX officials on Tuesday raided the premises of the Gupta family at the centre of a corruption scandal involving South Africa's former president, Jacob Zuma, on suspicion they were bringing money into their native country, an official said, reports Reuters. South Africa's anti-graft watchdog has accused the India-born Gupta brothers of using their friendship with Zuma to influence policy and amass wealth. Lenders weigh on Indian stocks -3.8 *Change in currency YTD (%) Dollar returns YTD (%) -1.7 FTSE 100 THE EUROPEAN UNION intendstotarget€2.8billion($3.5 billion) of US goods ranging from T-shirts and whisky to motorcyclesandladdersshould President Donald Trump go aheadwith his plan to impose a 25% tariff on foreign steel. The EU aims to apply a titfor-tat levy on a range of consumer, agricultural and steel goods imported from the US, according to a list drawn up by theEuropeanCommissionand obtained by Bloomberg News. The commission, the EU’s executive arm, discussed the measures with representatives of the bloc’s governmentsatameetingonMonday DOW JONES *Change in currency YTD (%) Dollar returns YTD (%) BLOOMBERG Brussels, March 6 350 Tax officials raid Gupta family properties ON EDGE 40,336 ONGC VIDESH, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has signed a pact with Iran's IDRO Oil to jointly bid for a $1-billion contract for development of Susangerd oilfield in southern Iran, reports PTI. The onland Susangerd field in Khuzestan province is one of the newest finds, which Iran hopes will produce around 30,000 barrels per day of oil in two development phases. Nifty 50 -4.3 1,638 295 IN THE NEWS ONGC inks pact to bid for $1-bn Iran contract INDIAN MARKET FARES BADLY AMONG MAJOR PEERS 2016-17* 2017-18* *April-December *Apr-Dec, 2017-18 EzeDox: A central place for all your documents Apart from goods trade, India's software exports to the US were more than $50 billion, or over half of such shipments in FY17; the dollar was the main invoice currency, accounting for 73% of software exports in FY17 This start-up provides a digital locker solution built on the Aadhaar ecosystem to connect businesses and users ■ Startups, P15 Top export items* ($ m) Gems & jewellery 7,501 Garments & textiles 4,584 Pharma 3,475 BANKS’ SYSTEMS Loopholes were flagged but not fixed REUTERS March 6 A$2-BILLION FRAUD atIndia’s second-biggest state-run lender Punjab National Bank hasraisedquestionsaroundthe auditing and regulatory oversight of the country’s banks. Documents reviewed by ReutersshowtheReserveBank of India (RBI) had come across issues related to the misuse of the SWIFT interbank messagingsystem,andotherloopholes in many banks’ information technology infrastructure, as earlyas mid-2016. Manyoftheseloopholesare onlynowbeing closed afterthe PNB case. Here are details from a series of “confidential” letters from the RBI to the top management at banks, flagging loopholes and recommending solutions: JULY-AUGUST 2016 On July 22, 2016, the day when state-run Union Bank of ■ India reported a cyber breach, the RBI sent an email to all banks asking them to strengthen controls over paymentinstructionssenttoother banks, and to reconcile their nostro accounts — accounts held in foreign currency at another bank overseas — on a “real time/near real time basis so that any abnormality is noticed immediately”. ■ On August 3, 2016, the RBI sent a letter to banks reminding them about the July letter and asking them to immediately get their SWIFT system “comprehensively audited”, according to the letter reviewed by Reuters. Continued on Page 2 Continued on Page 2 CBI arrests veep of Gitanjali Group THE CENTRAL BUREAU of Investigation (CBI) onTuesday arrested Vipul Chitalia, the vice-president (banking oper- ations)oftheGitanjaligroupof companies,in connectionwith its probe into the multi-crore Punjab National Bank (PNB) fraud,officials said Chitalia was produced before a special court here PRESS TRUST OF INDIA Mumbai, March 6 which remanded him in CBI custody till March 17. This marks the 19th arrest in the case, a CBI spokesperson said. ● PNB CASE PRESS TRUST OF INDIA Mumbai, March 6 SFIO calls top private bankers THE SERIOUS FRAUD Investigation Office (SFIO) is said to have asked senior executives from 31 banks that had business dealings with firms promotedbyNiravModiandMehul Choksi to help in its probe into the over `12,000-crore Punjab NationalBank(PNB)scam.They havebeenaskedtobepresentat its office in Mumbai,according to sources. Sourcessaidaspartofregular practice the office of the bank head receives such letters, leading to sections of media reporting that ICICI Bank managing director and CEO Chanda Kochhar and her Axis Bank counterpart Shikha Sharmahavebeensummoned. Continued on Page 2 Vlasof Cay ● 31 LENDERS QuickPicks Views that make your heart leap I know just the place Discover the best of Queensland with Singapore Airlines and SilkAir BRISBANE | CAIRNS From 48,000 Economy Class, All-in return Start your Queensland holiday in the vibrant capital Brisbane, or visit Gold Coast for its adrenalin pumping attractions and world class sporting events, like the Gold Coast 2018 Commonwealth Games taking place from 4 to 15 April 2018. Alternatively, escape to luxurious Hamilton Island in The Whitsundays or dive deep into adventure in Cairns, the gateway to the Great Barrier Reef. Redeem a complimentary S$20 Changi Dollar Voucher in transit till 31 March 2018, for shopping, dining or lounge access at Singapore Changi Airport. Singapore Airlines flies to: BRISBANE | SilkAir the regional wing of Singapore Airlines, flies to: CAIRNS Cairns Govt to get `10k-cr EBRD approves Sebi to Tata Motors: dividend from RBI India’s membership Probe WhatsApp leaks THE GOVERNMENT expects to receive `10,000 crore as interim dividend from the Reserve Bank of India (RBI) this month, people with knowledge of the matter said, reports Bloomberg. The amount has been calculated for the six months through December 31, the people said. RBI’s financial year runs from July to June. It had earlier declined requests from the government for an additional payment after the dividend payout dropped to a five-year low. PAGE 10 INDIA IS all set to become the 69th member of the European Bank for Reconstruction and Development (EBRD) after shareholders of the international financial institution gave their nod to its candidature, reports PTI. The European development bank made this announcement on Tuesday. The Indian government had filed an application to seek EBRD membership back in December 2017. THE SECURITIES and Exchange Board of India (Sebi) has asked Mumbai-based automaker Tata Motors to conduct an internal inquiry into the leakage of unpublished price-sensitive information relating to its financial results and to take appropriate action against those responsible for the same, reports fe Bureau in Mumbai. Sebi further said the inquiry should be completed within a period of three months from the date of this order. 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