The rupee strengthened for the fifth time in six days on speculation the nation's relatively fast economic growth and rising stocks will attract investment from abroad.
The currency reversed an earlier loss after the Bombay Stock Exchange's benchmark Sensitive Index advanced 2.5 per cent to take its gains this month to 6 per cent. Overseas investors bought Indian shares worth $14.2 billion more than they sold since January 1 as the central bank forecasts the $1.2 trillion economy will expand 6 per cent or more in the year ending March 31. That will be the second-fastest pace of growth among major economies after China.
The rupee strengthened 0.4 per cent to 46.30 a dollar as of the 5 pm close in Mumbai. The currency has gained 3.9 per cent this quarter, the best performance among Asian currencies.
Offshore contracts indicated that the rupee will trade at 46.28 against the dollar in a month, compared with expectations of 46.47 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
The rupee declined earlier on speculation local refiners increased dollar purchases to pay for costlier crude-oil imports. The commodity has gained 78 per cent this year.
Bonds decline as investors pare holdings before auction
10-year bonds fell for the first time in three days on speculation some investors pared holdings of fixed-income securities ahead of a government debt auction this week.
More From This Section
The yield on the benchmark note maturing in 2019 rose to the highest level since October 27 as the government prepares to sell Rs 10,000 crore ($2.2 billion) of debt maturing in 2016, 2019 and 2027 on November 13. India plans to raise a record Rs 4.51 lakh crore from bond sales in the fiscal year ending March 31 to fund a widening budget deficit.
"The bond market is making room for the supply due later in the week," said Harihar. "Yields have risen modestly as some investors may be trimming positions."
The yield on the 6.90 per cent note due July 2019 climbed three basis points, or 0.03 percentage point, to 7.33 per cent as of the 5:30 pm close in Mumbai, according to the central bank's trading system. The price fell 0.21 per cent, or 21 paise per Rs 100 face amount, to Rs 97.02. Yields have risen 2.08 percentage points this year.
The government will offer Rs 3,000 crore of the 7.02 per cent notes due 2016 and Rs 4,000 crore of the 6.90 per cent notes maturing in 2019 at the auction, according to the finance ministry. It will also offer Rs 3,000 crore of the 8.24 per cent notes due 2027.
In the derivatives market, 10-year bond futures maturing in December was at 8 per cent, according to the website of the National Stock Exchange of India. Contracts due March were at 8.29 per cent.
The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose to 6.70 per cent from 6.65 per cent yesterday.
CALL RATE: Ends flat on liquidity abundant
The call money rate ended unchanged at 3.25-3.30 per cent on Wednesday because liquidity was abundant for banks to meet their daily reserve needs, dealers said.
CBLO ended at a weighted average rate of 2.92 per cent, compared with Tuesday's 2.87 per cent.
"Most banks were on the lending side as they have comfortable liquidity position. The CBLOs slightly rose in the afternoon as supply fell after mutual funds exited the market," said a dealer with a private sector bank. Mutual funds — the main lenders in the CBLOs market — are not allowed to lend after 1430 IST.
“After the exit of the mutual funds, most of the deals in the CBLO took place above 3 per cent as banks were not willing to lend at lower rates, when call money rate is around 3.25 per cent,” the dealer added.
on Wednesday, banks parked Rs 1.02 lakh crore at the Reserve Bank of India's reverse repo tender compared with Rs 99,440 crore on Tuesday.