Rising inflation prompts stock sales rupee dips

The rupee fell by the most in more than a week, after foreign investors pulled money from local stocks on slowing growth and accelerating inflation.

The currency slid 4.1 per cent in August, the biggest monthly decline since May 2010, as foreign investors sold $2.3 billion more Indian shares than they bought, exchange data show. The rupee weakened 0.4 per cent to 45.99 per dollar at the close in Mumbai, according to data compiled by Bloomberg, the biggest decline since August 24. Food inflation data for the week ended Aug. 27 are due on Thursday.

Offshore forwards indicate the rupee would trade at 46.37 to the dollar in three months, compared with expectations of 46.31 at the end of last week. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

BONDS RECOVER
Government bonds recovered smartly on fresh buying support from banks and companies. The 7.80 per cent government security maturing in 2021 shot up to Rs 96.82 from Rs 96.4375 previously, while its yield declined to 8.28 per cent from 8.34 per cent. The 8.13 per cent government security maturing in 2022 strengthened to Rs 98.17 from Rs 97.7075.

The 7.99 per cent government security maturing in 2017 rose to Rs 98.3650 from Rs 98.10, while its yield looked down to 8.35 per cent from 8.40 per cent. The 8.08 per cent government security maturing in 2022, the 7.83 per cent government security maturing in 2018, the 8.07 per cent government security maturing in 2017 and the 8.28 per cent government security maturing in 2027 were also ended higher at Rs 97.83, Rs 97.5575, Rs 99.00 and Rs 97.53, respectively.

CALL RATE EASES
The call rate eased on the overnight call money market on Monday, owing to ample liquidity available in banking system. The overnight call money rate closed lower at 8.00 per cent from last weekend’s level of 8.05. It moved in a range of 8.05 per cent and 7.75 per cent.