The Indian rupee strengthened to a 10-month high on Monday, following cues from record high domestic stocks, ahead of the exit poll predictions due after market hours.
Dodging the depreciating trend in other Asian currencies, the rupee opened at 60.01 per dollar against its Friday’s close of 60.03, but soon rose 0.85% to 59.50 per dollar, its highest level since 29 July.
At 2.13pm, the rupee was trading at 59.73, up 0.49%, while most of the Asian currencies were trading lower. The Malaysian ringgit fell 0.32%, Philippines peso was down 0.17%, Singapore dollar was down 0.15%, Japanese yen was down 0.15%.
The dollar index, which measures the US currency’s strength against major currencies, was trading at 79.815, down 0.11% from its previous close of 79.903.
The 30-share Sensex was trading higher by 2.01%, or 462.88 points, at 23,457.11 points, the National Stock Exchange’s 50-share Nifty rose 1.92% to 6,990.8 points.
The S&P BSE Oil and Gas, S&P BSE Bankex, S&P BSE Capital Goods, S&P BSE FMCG, and S&P BSE Auto and Power indices were the top sectoral gainers, up about 2.5% each, followed by S&P BSE Realty, S&P BSE Metal and S&P BSE Consumer Durables indices which were up 1.74% each. The S&P BSE Healthcare index was the top sectoral loser, down 0.68%.
Currency dealers say the rupee is tracking the equity markets. “Rupee is tracking equity markets, but the dollar buying that you see from public sector banks when the rupee strengthens to 59.95 level is absent today (Monday). So exporters are selling, but PSU banks are not buying,” said Harihar Krishnamurthy, head of treasury at FirstRand Bank Ltd.
Currency traders said the expectation that the Bharatiya Janata Party (BJP) is forming the next government is boosting local equities and the currency.
According to Satyajit Kanjilal, managing director at ForexServe, a currency consultant, if the BJP and its allies secure 300 seats, the rupee may appreciate as much as 58.50 a dollar. But the Reserve Bank of India (RBI) may not want to let the currency appreciate much as that would hurt India’s export competitiveness. However, the present rally may reverse if the poll results show even a small amount of uncertainty, he said. Rupee in that case may weaken to the 61.50 a dollar level. For now, most of the positive news expectations have factored in the exchange rate, he said.
“The exuberance seen now in the stock and rupee is because people are expecting a new government with a large mandate will sort out policy paralysis. Already key sectors like power and infrastructure is rallying but RBI will unlikely let the rupee strengthen too much and they are actively buying dollars from the market and building up the country’s reserves. Much of the rally in rupee is largely behind us,” Kanjilal said.
Trade deficit in April narrowed to $10.1 billion against $10.5 billion in March. Exports rose 5.3% year-over year to $25.6 billion, while imports fell 15% to $35.7 billion in the same period.
Since the beginning of this year, the rupee has gained 3.46%, while foreign institutional investors have bought $5.55 billion during the period from local equity markets.
The yield on India’s 10-year benchmark bond was trading at 8.737%, compared with its Friday’s close of 8.749%. Bond yields and prices move in opposite directions.
The government will issue numbers for the Index of Industrial Production (IIP) for March and Consumer Price Index (CPI) inflation data for April at 5.30 pm on Monday.
A Bloomberg poll showed that the industrial output for march will fall 1.5% as against a decline of 1.9% in February, while CPI Inflation will be 8.5% for April as against 8.31% in March.
Source:- livemint.com
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