Rupee advanced to the strongest closing level in six weeks on optimism foreigners will pour more money into the nation’s shares, lured by the economy’s relatively fast growth.
Overseas investors’ bought $555 million more Indian equities than they sold on September 17, the most in two months and a ninth straight day of net purchases, according to latest figures from the stock exchange. The rupee gained 0.4 per cent to 47.965 a dollar as of the 5 pm close in Mumbai, from 48.135 at the end of last week. Local financial markets were closed Monday for the Eid holiday. Offshore contracts indicate bets the rupee will trade at 48.03 to the dollar in a month, compared with expectations of 48.29 at the end of last week.
Funds based abroad have bought Indian equities worth a net $9.75 billion this year, taking their holdings to $65 billion, according to the Securities and Exchange Board of India. The Bombay Stock Exchange’s Sensitive Index is up 75 per cent from the end of 2008.
Bonds fall ahead of govt debt auction this week
Country’s bonds fell after the government said it will sell more debt than it previously planned at an auction this week. The yield on the benchmark 10-year note rose from near a one-month low before the sale of Rs 12,000 crore ($2.5 billion) of bonds on September 25, Rs 4,000 crore more than planned. India plans to borrow a record Rs 4.51 lakh crore from the bond market in the fiscal year ending March 31.
The yield on the 6.90 per cent note due July 2019 rose three basis points to 7.12 per cent as of the 5.30 pm close in Mumbai, according to the central bank’s trading system. The price fell 0.22, or 22 paise per 100 rupee face amount, to 98.43.
The government will offer Rs 6,000 crore of notes due 2017, Rs 4,000 crore of debt maturing in 2020 and Rs 2,000 crore of bonds due in 2032 at this week’s auction, the RBI said in a statement.
RBI rejected bids at a bond auction on August 7, without providing details. It had planned to raise Rs 12,000 crore.
Nine Indian states sold a total Rs 9,110 crore of 10- year debt at yields ranging from 7.70 per cent to 8.24 per cent at an auction today, the central bank said.
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 6.63 per cent from 6.60 per cent on September 18.
Inflation
Reserve Bank of India will allow the rupee to strengthen in order to reduce the cost of imports and curb inflation without raising borrowing costs, according to Goldman Sachs Group Inc and HDFC Bank.
The rupee will advance to 47.3 by the year-end, helping Asia’s third-largest economy save on costs of buying crude oil and sugar, Goldman Sachs economist Tushar Poddar said in a September 20 interview. Curbing inflation is crucial for policy makers as higher prices reduce purchasing power in a nation where about 75 per cent of the 1.2 billion people survive on less than $2 a day.
“The exchange rate is a tool available and will go some way in taming inflationary expectations,” Poddar said. “A stronger rupee may give the central bank headroom in using other monetary policy tools more effectively.”
India’s wholesale prices rose for the first time in 14 weeks as a nascent global economic recovery pushed up the cost of commodities and manufactured goods. The benchmark wholesale- price index climbed 0.12 per cent in the week to Sept. 5 from a year earlier, after retreating 0.12 per cent in the previous week, the government said on September 17.
Bonds fall ahead of government debt auction this week Country’s bonds fell after the government said it will sell more debt than it previously planned at an auction this week.
The yield on the benchmark 10-year note rose from near a one-month low before the sale of Rs 12,000 crore ($2.5 billion) of bonds on September 25, Rs 4,000 crore more than planned. India plans to borrow a record Rs 4.51 lakh crore from the bond market in the fiscal year ending March 31.
“Investors were probably not anticipating the increased supply, which has caused some realignment of yields upwards,” said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai. “There was some optimism built in earlier, which is now being reversed.”
The yield on the 6.90 per cent note due July 2019 rose three basis points to 7.12 per cent as of the 5.30 pm close in Mumbai, according to the central bank’s trading system. The price fell 0.22, or 22 paise per 100 rupee face amount, to 98.43.
The government will offer Rs 6,000 crore of notes due 2017, Rs 4,000 crore of debt maturing in 2020 and Rs 2,000 crore of bonds due in 2032 at this week’s auction, the RBI said in a statement.
RBI rejected bids at a bond auction on August 7, without providing details. It had planned to raise Rs 12,000 crore.
Nine Indian states sold a total Rs 9,110 crore of 10- year debt at yields ranging from 7.70 per cent to 8.24 per cent at an auction today, the central bank said.
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 6.63 per cent from 6.60 per cent on September 18.
