The Indian rupee jumped over 2 per cent against the U.S. dollar and the BSE Sensex surged around 550 points on Thursday after new Reserve Bank governor Raghuram Rajan announced a spate of measures to defend the currency.
Traders and analysts were optimistic that Dr Rajan will unveil a new strategy for the rupee, which has plunged 20 per cent this year. Analysts said they had expected the 50-year-old academic and celebrated economist to do his homework, but had not expected him to detail so comprehensive a plan.
The rupee opened higher and extended gains. As of 09.25 a.m., the partially convertible rupee traded at 65.53 per dollar as against Wednesday's close of 67.06.
The sharp gains in the rupee triggered buying in banking stocks, which have suffered the most since the rupee started its downhill journey against the greenback.
The Bank Nifty, the barometer for banking stocks, jumped 9 per cent. The BSE Senesx scaled the 19,000 mark and the broader Nifty traded above the key 5,600 levels.
In his first address, Dr Rajan outlined plans to attract more funds from overseas to support the rupee. He said the RBI will attract more funds from non-resident Indians (NRIs) as part of a broader push to lure inflows. Under the plan, the central bank will offer a swap window to banks for fresh dollar deposits mobilised from non-resident Indians.
The central bank will also offer forex swap into rupees at a concessional rate below market levels for banks that raise dollar funds through overseas borrowings, Dr Rajan said.
The RBI will look to liberalise markets, including pushing for more rupee trade settlement, introducing new financial products such as overnight interest rate swaps and removing curbs on opening new branches by Indian banks, he added.
Source:- profit.ndtv.com
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