Anoop Agrawal, Bloomberg
Mumbai: The rupee rose, extending nine weeks of gains, on speculation rising corporate profits and rallying stocks will lure more funds from abroad.
The currency climbed to the highest in almost nine years as the benchmark stock index heads for its third monthly advance, suggesting overseas investors are buying more equities as economic growth quickens. Hindalco Industries Ltd the nation’s biggest producer of non-ferrous metals, last week announced a record fourth-quarter profit and publisher HT Media Ltd said quarterly net income rose more than seven times.
“The undertone is clearly bullish for the rupee,” said Parthasarathi Mukherjee, treasurer at UTI Bank Ltd in Mumbai. “That sentiment is expected to be sustained because the capital flows are consistent. The growth momentum should attract more flows in the immediate future.”
The rupee rose 0.7% to 40.57 against the dollar as of 9:17 am in Mumbai, according to data compiled by Bloomberg. It earlier rose to 40.545, the highest since 21 May 1998.
The Bombay Stock Exchange’s Sensitive Index gained a fourth week through 4 May on optimism a government report 31 May will show economic growth accelerated in the fiscal year ended 31 March. The Central Statistical Organisation on 7 February raised its growth forecast for the period to 9.2%.
Prime Minister Manmohan Singh is aiming for growth of 10% a year through to 2010.
‘Respite in Flows’
Any gain in the rupee may be tempered by speculation importers will take advantage of its recent rally to buy dollars.
“The current levels provide a reasonably good opportunity for importers to buy dollars and offset some overseas obligations,” said V. Rajagopal, chief currency trader at Kotak Mahindra Bank Ltd in Mumbai. “We expect that there will soon be a respite in the capital flows and the rupee will find it difficult to appreciate after a point.”
The currency may drop to 41.1 a dollar by the end of this week, Rajagopal said.
Quickening economic growth may boost the nation’s imports and widen its current-account gap, putting pressure on the currency to weaken. India had a current-account deficit of $11.8 billion in the nine months through December, the central bank said 30 March. The current-account is a broad measure of trade that includes services, tourism, employee remittances and investment income.
The rupee may still gain after global funds bought $1.52 billion more Indian stocks than they sold last month, according to stock exchange data. They sold $243 million more equities than they bought in March.
Hindalco Industries on 4 May said profit in the quarter to 31 March was a record Rs7.21 billion ($176 million) as rising demand from construction companies and carmakers boosted aluminum prices. HT Media, which owns New Delhi’s Hindustan Times newspaper, said profit rose to Rs239.6 million, from Rs31.7 million a year earlier.