Rupee rises to 5-month high on capital inflows

The rupee strengthened to a five-month high, as overseas investors increased purchases of the nation’s assets to benefit from economic growth.

Funds based abroad added $915 million to holdings of Indian equities on April 4, the biggest single-day purchase since November, according to data published yesterday by the Securities & Exchange Board of India. The government had forecast on February 28 the $1.3-trillion economy would expand as much as 9.25 per cent in the financial year that started April 1, the most since 2008.

“Of late, the capital inflows have been huge and that is positive for the rupee,” said Roy Paul, deputy general manager at Federal Bank Ltd. in Mumbai. “There is a global acceptance that India is a growing economy.”

The rupee climbed 0.4 percent to 44.245 per dollar as of 9:45 am in Mumbai, according to data compiled by Bloomberg. The currency earlier touched 44.23, the strongest level since November 8, and has appreciated 1 per cent this year.

Foreign investors raised stock holdings by $1.56 billion in March, the most in four months, according to the Securities & Exchange Board.

BOND YIELDS LOW
India’s 11-year bond yields were near the lowest level in a week ahead of the first government debt sale in almost two months.

The finance ministry will auction $2.7 billion of securities maturing in seven, 10 and 29 years on April 8. Investors may bid “heavily” for the new 10-year bond, said Chauhan, chief dealer at State Bank of Bikaner & Jaipur in Mumbai. He predicted the notes may be sold at yields at least 15 basis points, or 0.15 percentage point, below the existing 11-year debt. “The yields between the two bonds have to align with those who don’t get the 10-year debt at the tender may want to hold the 11-year bonds,” Chauhan said.

The yield on the 8.13 per cent note due September 2022 rose one basis point to 8.06 percent at the 5 pm close in Mumbai.

CALL RATES DIP
Call rates declined further to close at 6.05 per cent at the overnight call money market here on Wednesday due to lack of demand from from borrowing banks and government bond prices also eased on fresh selling pressure from banks and corporates. The call money rate closed lower at 6.05 per cent from the overnight closing level of 6.50 per cent. It moved in a range of 6.05 per cent and 5.85 per cent. The 8.13 per cent government security maturing in 2022 moved down to Rs 100.52 from 100.57 yesterday, while its yield inched up to 8.06 per cent from 8.05 per cent. The 8.08 per cent government security maturing in 2022 slipped to Rs 100.13 from Rs 100.17, while its yield edged up to 8.06 per cent from 8.05 per cent.