Rupee gains as FIIs pump in funds

MARKET ROUND-UP

Rupee advanced for a second week on speculation overseas investors will increase purchases of local equities to benefit from record earnings of the domestic companies.

Overseas fund managers have bought more stocks than they sold in the five days through January 22, the longest buying streak in more than two months, according to the Securities and Exchange Board of India. That helped the benchmark stock index rise to a record today.

"Dollar flows from global funds are strong and the main source of supply as of now,'' said Pankaj Sharma, chief currency trader at state-owned Union Bank of India in Mumbai. "There is scope for the rupee to rise further.''

The rupee rose 0.2 per cent this week to 44.2513 against the dollar as of the 5 pm close in Mumbai. Markets are closed tomorrow for the Republic Day vacation.

Bharat Heavy Electricals, the country's biggest maker of power equipment, may say third-quarter profit rose 35 per cent as its factories ran at full capacity producing generators, boilers and turbines. Hindalco Industries, the nation's biggest producer of non-ferrous metals, posted a record net income in the quarter through December 31.

The local currency pared gains on speculation refiners and other importers will buy dollars to settle month-end bills.

"Importers will step in now to buy dollars as they haven't bought any big amount in the last few weeks,'' said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. "It's an opportunity for companies such as refiners as crude has fallen in a reasonably big way.''

Imports rose 43 per cent to $15.88 billion in November helped by a 48 per cent increase in oil imports. The government this week is scheduled to release the data for December.

The second-fastest economic growth among major economies is fuelling import demand, increasing the amount of rupees that need to be exchanged to pay for goods such as oil.

A stronger currency makes imports cheaper for companies such as Indian Oil Corporation, the country's biggest oil refiner.

Crude oil prices are down 28 per cent from their all-time high in July, spurring demand for dollars from the nation's refiners that meet three-quarters of their energy needs from abroad.

The rupee weakened in the forwards market. Investors who want to buy forward contracts to purchase dollars a year from now using rupees need to pay 3.33 per cent more than the exchange rate in the cash market, compared with 3.22 per cent yesterday.

Forwards are agreements in which assets are traded at a fixed price for later delivery.