Rupee moves north on investment hopes

The rupee gained for the third day on speculation rising corporate profits will encourage international investors to buy stocks and other assets in the world's second-fastest growing major economy.

The currency rose to its highest in more than week after Tata Consultancy Services yesterday said its profit rose 47 per cent to a record Rs 1,100 crore ($249 million) in the three months ended December 31.

"The rupee may maintain its strengthening bias for another month or so, with the support from capital inflows,'' said Shuchita Mehta, an economist at Standard Chartered Bank in Mumbai.

"Capital flows of a more long-term nature, such as foreign direct investment, will also support the rupee as the economy sustains its strong growth momentum."

The rupee rose 0.01 per cent to 44.2738 against the dollar at the close. The currency had five monthly advances through December, its longest winning streak since 2004. It has gained 1.7 per cent in January.

India's sustained growth is attracting more direct investment. The nation's gross domestic product grew 9.2 per cent in the three months through September, second only to China among the world's major economies. Industrial production expanded 14.4 per cent in November, the most since 1995.

Average monthly direct investment from overseas doubled to $731 million in the first half of the current fiscal year that ends March 31, from the same period a year earlier, according to government data.

The rupee's gains were limited by speculation refiners would purchase dollars to benefit from a rally in the local currency and a decline in crude oil prices.

A 30 per cent drop in oil prices and a 4.7 percent gain in the rupee in the past six months may prompt refiners to import more oil into India, which acquires three-quarters of its energy needs from abroad. A stronger rupee reduces the cost of shipments into the country.

"The rupee has appreciated of late and we may soon see demand for dollars arising from importers, particularly refiners," said D Sampath Kumar, treasurer at IndusInd Bank in Mumbai. Oil imports increased 31 per cent in the quarter ended September 30, contributing to a wider current-account gap, the central bank said on December 29.

The current-account deficit increased to $6.9 billion in the three months through September from $4.8 billion in the previous quarter.