Credits feel Indian exposure

Credits exposed to India suffered on Wednesday as the rupee continued to depreciate sharply.

The Indian currency slid another 4%, with the markets unimpressed by central bank intervention and the government's ten-point plan aimed at curbing the current account deficit. The rupee is now one of the world's worst performing currencies this year.

The prospect of QE tapering in the US next month, while not a certainty, has led to considerable outflows from emerging markets. Countries with significant current account deficits, such as India and Indonesia, have felt this more acutely than surplus states. India's spreads widened 6bps today to 364bps, and have now given up almost 200bps in the last three months.

India's plight led to European investors turning their focus on names with European exposure, such as Holcim. The Swiss cement company - the world's largest - gets nearly 20% of its sales from India, and earlier this month warned that adverse market conditions affected its profits in the first-half of the year. This makes it hard to be optimistic about the company's performance in the second-half.

Holcim's CDS spreads widened 10bps to 157bps, and they have underperformed since the emerging market turmoil started in May. News of an asset swap deal today with Mexican rival Cemex had little impact on the company's credit standing.

Elsewhere, developed markets showed resilience and recovered from earlier weakness. The Markit iTraxx Europe was 0.5bp tighter at 106.bps, while the Markit CDX.NA.IG was steady at 84bps.

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