Indian corporates hit again

Indian regulators reinforced controversial new rules on derivatives structures late last year to prevent companies from taking outright speculative bids on the financial markets. But the rulings come at a bad time for Indian corporates struggling to work out how to restructure old currency positions that have suffered large mark-to-market losses

The Indian corporate sector rode on a wave of euphoria in 2007, piling into structured derivatives trades in a bid to cheapen their liabilities and boost their returns from the currency markets. But with the markets turning against them in late 2007 and early 2008, these institutions found themselves sitting on tens of millions of US dollars in real and mark-to-market losses. And matters have since gone from bad to worse.

A typical foreign exchange trade involved companies swapping dollar- or