The rupee advanced for the first time this week, rising 0.9 per cent to 50.095 per dollar, after latest data showed equity purchases by foreign funds rose to the most since August. The currency has advanced 1.3 per cent this month.
The currency, which has advanced 1.3 per cent this month, strengthened the most in a week on optimism signs of a global economic recovery will increase demand for emerging-market assets. Asian stocks climbed after reports showed US consumer confidence jumped this month by the most since 2005 and the pace of a slide in home prices slowed.
Overseas investors bought $368 million more Indian shares than they sold on April 27, data from the Securities & Exchange Board of India showed.
“The rupee is stronger on expectations that stocks will extend recent gains, attracting more overseas capital,” said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai. “There are signs that the global economic situation may be improving.”
Offshore contracts indicate bets the rupee will trade at 50.21 to the dollar in a month, compared with expectations for a rate of 50.79 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 Bombay Stock Exchange’s Sensex rallied 3.7 per cent today, the most since April 2. The index has rebounded 40 per cent from a three-year low reached on March 9. Overseas funds have bought a net $1.6 billion of Indian shares this month. The MSCI Asia Pacific excluding Japan Index climbed 2.7 per cent.
Bonds decline
Bonds fell for a second day on speculation some investors sold part of their holdings to raise cash for purchases at bond auctions in coming weeks.
Yields on notes due 2019 climbed to the highest in more than a week, rising one basis point to 6.23 per cent, before the government’s scheduled sale of Rs 12,000 crore of debt in the first week of May. The price fell 0.08, or 8 paise per 100-rupee face amount, to 98.72. A basis point is 0.01 percentage point. India plans to raise a record Rs 2.41 lakh crore from bond sales in the six months ending September 30 as it increases spending to revive economic growth.
Financial markets will be closed in Mumbai tomorrow for elections and May 1 for a local holiday. “Some traders may be making room for purchases at upcoming bond auctions,” said S Srikumar, chief debt trader at state- owned Corporation Bank in Mumbai.
“Yields can rise further from here as traders aren’t keen to hold on to positions ahead of the long weekend.” Bonds pared losses on speculation rising cash in the financial system will boost demand for debt.
“Fundamentals beginning with liquidity are in favour of bond yields softening further,” said Srinivasa Raghavan, head of treasury at Mumbai-based IDBI Gilts, a primary dealer that underwrites government debt sales. “That should happen sooner than later. The rise in yields today isn’t a trend.”
Subscriptions at the Reserve Bank of India’s daily reverse- repurchase auction, a gauge of surplus funds, averaged Rs 1.1 lakh crore a day this month, versus Rs 36,400 crore in March.
The cost of five-year swaps, or derivative contracts used to guard against rate fluctuations, increased.
