Expected inflows into debt markets to stiffen rupee: Experts

Expected inflows of foreign funds into the Indian debt markets, coupled with anticipated hedging by importers is expected to keep the rupee value stable during the upcoming week, experts said on Saturday.

According to market observers, rupee value is expected to be stable around 65.90-66.50 to a US dollar in the coming week, as foreign funds increase their inflows into the Indian debt markets.

"The rupee value is expected to maintain a stable trajectory during the upcoming week due to the anticipated foreign capital influx into the central and the state governments' bonds," Anindya Banerjee, associate vice president for currency derivatives with Kotak Securities, told IANS.

On September 29, RBI decided to raise foreign investors' exposure limits in central government's securities to five percent of the outstanding stock by March 2018.

In another key decision, the central bank had set a separate limit for investment by foreign funds in state development loans, which are to be increased in phases to reach two percent of the outstanding stock by March 2018.

The RBI's decision is expected to usher in around $2.5 billion by this fiscal end.

"The trickling-in of foreign funds into the country's equity markets should keep the rupee on a stable footing," Banerjee elaborated.

On a weekly basis, the rupee strengthened by seven paise at 66.14 (January 1) to a US dollar from its previous close of 66.21 to a greenback (December 23).

The National Securities Depository Limited (NSDL) figures showed that the FPIs were net buyers during the week ended January 1 2016. They bought Rs.467.45 crore or $70.36 million in equity and debt markets from December 28-January 1.

The data with stock exchanges showed that the FPIs bought stocks worth Rs.1,209.59 crore in the week under review.

Nevertheless, the stock exchanges data showed that FPIs had taken out a total of Rs.20,373.69 crore during 2015.

On technical levels, rupee has got a healthy spot market support at 65.90 to a US dollar.

"Spot has a good support near 65.85/90 levels and is facing resistance near 66.50 levels," Hemal Doshi, chief currency strategist, Geofin Comtrade, told IANS.

"However, short term technical suggest that any dip towards 66/66.10 should be bought for a up move towards 66.50."