Rupee rises to near-5-month high on stock inflows

The rupee saw gains on Tuesday, touching the highest level in almost five months, after overseas investors boosted holdings of the country’s shares to benefit from the economic growth outlook for India.

Global funds bought $1.6 billion Indian stocks more than they sold last month through March 30, exchange data show.

India’s $1.3-trillion economy is expected to expand 9.25 per cent this financial year started April 1, the most since the year through March 2008, the government forecast in February.

“The stock market is looking positive with decent capital inflows,” said J Moses Harding, a Mumbai-based executive vice president at IndusInd Bank Ltd. The rupee may trade between 44.50 and 45 per dollar over the next month, he said.

The rupee strengthened 0.3 per cent to 44.46 per dollar as of 9:46 am in Mumbai, according to data compiled by Bloomberg. It touched 44.32 earlier, the strongest level since November 11. The currency market was closed yesterday and on April 1.

Offshore forwards indicate the rupee will trade at 45.15 to the dollar in three months, compared with expectations of 45.27 on April 1. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

BOND YIELDS DOWN
Federal bond yields continued to trade lower on Tuesday afternoon as sentiment was buoyed ahead of the auction of the fresh 10-year paper this Friday but a central bank deputy governor's comments pulled yields off the day's lows.

The government on Friday said it would auction three bonds worth $2.7 billion on April 8, including Rs 50 lakh crore of the new 10-year paper. At 3 pm, yield on the most-actively traded 8.13 per cent, 2022 bond was at 8.05 per cent, off the day's low of 8.04 per cent, but below Thursday's close of 8.09 per cent. the bond market was closed on Friday for banks' annual account closing and on Monday for a local holiday. The second most-traded 8.08 per cent, 2022 bond yield was at 8.06 per cent, off the day's low of 8.04 per cent, but below previous close of 8.08 percent.

CALL RATES DROP
Call rates dropped to end at 6.50 per cent at the overnight call money market on Tuesday due to lack of demand from from borrowing banks, while the government bond prices firmed up on fresh buying support from banks and corporates. The call money rate closed lower at 6.50 per cent from last weekend’s level of 8.75 per cent. It moved in a wide range of 7.10 per cent and 5.75 per cent. The 8.13 per cent government security maturing in 2022 shot up to Rs 100.57 from 100.32 previously, while its yield declined to 8.05 per cent from 8.09 per cent.