Re advances on borrowing limit breather

The rupee advanced for the fourth day after the government increased the amount local companies can borrow from abroad.

A finance ministry official, who declined to be identified, said yesterday companies can borrow $22 billion from overseas, more than the earlier limit of $18 billion.

Companies converting the proceeds from overseas fund-raising helped spur a 5.6 per cent gain in India's currency in the past six months.

"It's a boost for the rupee from a sentiment point of view,'' said V Rajagopal, chief currency trader at Kotak Mahindra Bank in Mumbai.

"Sooner or later, it will push the dollar flows in the market."

The rupee rose 0.2 percent to 44.1850 per dollar as of the 5 pm close in Mumbai, according to data compiled by Bloomberg. ICICI Bank Ltd., India's largest lender by market value, and Reliance Industries Ltd., owner of the nation's biggest refinery, are among the increasing number of local companies raising funds abroad to fund expansion needed to cater for growing demand in Asia's fourth-biggest economy.

ICICI Bank raised $1 billion in Japanese yen last month, the biggest syndicated loan by an Indian bank. Reliance said in November it may raise as much as $2 billion to expand oil and gas exploration.

The currency pared gains on speculation local refiners will purchase dollars to benefit from the gain in the local currency and the decline in crude oil prices.

"Oil companies may buy dollars to offset some positions as this is a good opportunity,'' said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. "I expect some more dollar demand to emerge and prevent the rupee from strengthening in the next few days.''

India's currency has gained for five straight months since touching a three-year low in July, helped by the 30 per cent slide in oil prices. India depends on imports to meet 75 per cent of its energy needs.