Rupee advances on equity inflow hopes

The rupee advanced a second day on optimism overseas investors will resume buying local equities to benefit from rising corporate earnings.

Asia's fourth-largest economy may grow a record 9 percent in the year through March helping the key stock index rise for the three weeks of 2007. Jet Airways (India) Ltd., the nation's biggest domestic airline, had its first profit in three quarters.

Dr Reddy's Laboratories Ltd., the country's third-largest drugmaker, said its profit almost tripled.

"The sustained growth in company earnings in the past few quarters are assuaging sentiment on the rupee,'' said V Venugopal, a currency trader at state-owned Andhra Bank in Mumbai. "That will help the rupee rise this week"

The rupee rose 0.2 per cent to 44.19 per dollar as of the 5 pm close in Mumbai from January 19, according to data compiled by Bloomberg. It may advance to 44.10 in the next few days, Venugopal said.

Overseas fund managers have sold almost $182 billion more local stocks than they bought this year. They purchased a net $8 billion in 2006 and a record $10.7 billion in 2005, according to data from the Securities & Exchange Board of India.

India's industrial production expanded at the fastest pace in 11 years in November as demand for cars, mobile phones and houses rose amid record salaries and bank lending.

The currency fell earlier on speculation refiners were stocking up on dollars to buy crude oil, after the price of the fuel declined almost 15 percent this year.

India's refiners, which meet three quarters of their energy needs from abroad, may step-up dollar purchase to save costs as the local currency has gained nearly 6 per cent in the past six months, said S T P Venugopal, chief currency trader at state-owned Central Bank of India. Gains in the rupee mean Indian companies have to convert less of the local currency into foreign exchange.

"There is intense speculation refiners are boosting crude buffer stocks after the slide in prices,'' Venugopal said.