Re gains for a sixth day as stocks advance

The rupee appreciated for a sixth day, the longest winning streak in almost nine months, as stock gains spurred optimism overseas investors will boost holdings of local assets to benefit from economic expansion.

The currency touched its strongest level in two weeks on speculation the government will unveil measures to spur growth and investment in its budget scheduled for February 26. The Bombay Stock Exchange Sensitive Index advanced for a second day following a report that showed factory output in India rose 16.8 per cent in December from a year earlier, the most since at least 1994.

“The rupee is on a rally because equities are showing a positive trend and that should attract capital flows,” said Roy Paul, assistant manager of treasury at Federal Bank in Mumbai. “The market is waiting for the budget now. The government may announce some steps to attract investment, and possibly give a push to privatisation.”

The rupee strengthened 0.2 per cent to 46.115 a dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. It reached 45.955, the highest level since February 3.

Economic growth
India’s $1.2-trillion economy may expand 7.2 per cent in the current financial year, after growing 6.7 per cent in the previous 12 months, the New Delhi-based Central Statistical Organisation said on February 8.

The government would sell as much as Rs 25,000 crore ($5.4 billion) of shares in state-owned companies in the fiscal year to March 31, more than half the total raised since privatisation efforts started in 1991, Sunil Mitra, former secretary of the department of disinvestment, said on January 18. India could sell shares in as many as 60 companies, the finance ministry said in November.

Bond yields rise to 16-month high on inflation
The 10-year bonds fell, pushing yields to their highest in 16 months, on concern investors will pare their holdings of fixed-income securities as accelerating inflation erodes returns.

Yields are near the highest level since October 2008 after a report this week showed the wholesale-price index climbed to a 15-month high in January. India won’t see a double-digit inflation and the present fiscal deficit wasn’t sustainable, Chakravarthy Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said yesterday.