Rupee advances on higher inflow hopes

The rupee gained on optimism rising corporate earnings will encourage overseas investors to buy stocks and other assets to benefit from growth in Asia's fourth-largest economy.

The currency rose to the highest in more than a week after Infosys Technologies, the country's second-biggest computer services provider, last week reported higher-than-expected profit.

It also gained on speculation foreign direct investment will increase after a report on January 12 showed industrial production expanded the fastest in 11 years in November.

"Rising corporate profits and economic data continue to underpin the strength of the economy and that should bring in more capital flows,'' said Parthasarathi Mukherjee, treasurer at UTI Bank in Mumbai. "This will be a key support for the rupee.''

The rupee rose 0.3 percent to 44.28 per dollar at the 5 pm close in Mumbai, according to data compiled by Bloomberg. The currency advanced in the five months through December, the longest winning streak since 2004. It gained 1.7 per cent in 2006.

Infosys on January 11 said net income rose 52 per cent to a record Rs 9.83 billion ($221.5 million) in the quarter ended December 31 from a year earlier. That beat the median Rs 9.78 billion estimate of 14 analysts surveyed.

Record growth in India's $775 billion economy is luring 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 percent in November, the most since 1995.

Monthly inflows of direct investment 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.

Any gains in the rupee may be curbed by speculation refiners will purchase dollars to benefit from a decline in crude oil prices to the lowest in 19 months.

A 30 per cent drop in oil prices in the past six months and a 4.2 per cent gain in the currency in the past five months may prompt refiners to import more oil to India, which acquires three-quarters of its energy needs from abroad.

The median estimate of a Bloomberg survey showed the rupee may decline this week to 44.66 a dollar, the lowest since December 20.

``Dollar demand will persist so long as crude oil is around current levels,'' said N S Paramsivam, Mumbai-based head of treasury at Essar Group, which has businesses in steel, shipping and oil.

``The fall in oil is of significance and I don't think it will rise in a hurry. Refiners are taking advantage of the situation.''