Mumbai: The rupee completed its first monthly gain this year as overseas investors increased purchases of local stocks.
The currency rebounded from the lowest level in at least a week after data from the Securities and Exchange Board of India showed average purchases of equities by foreign funds exceeded sales by $117 million (around Rs600 crore) in the week ended 27 March, compared with a net $49 million the previous week. The Bombay Stock Exchange’s Sensex index climbed 1.5%, capping the best month in almost a year. The rupee has recovered partly from Monday’s low, in line with the trend in equities, said Ritwij Mahant, a trader at IndusInd Bank Ltd.
The rupee climbed 0.8% this month to 50.735 per dollar at close in Mumbai, according to Bloomberg data. The currency still lost 3.9% since 31 December to round off a fifth quarter of declines, the longest losing streak since 2002. It is the second worst performer among the 10 most-used Asian currencies in the past 12 months, with a 21% loss.
Funds based abroad bought Indian equities worth $585 million last week, the most in a year, data from the stock market regulator show. They made net purchases worth $246 million in the previous week.
The Sensex added 9.2% in March, the first monthly advance since December.
Offshore contracts indicate traders bet the rupee will trade at 51.06 to the dollar in a month, compared with expectations for 51.49 on Monday. 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 rupee’s gains were limited by concern a widening current account deficit will boost demand for foreign currency.
The shortfall in the broad measure of trade and investment flows swelled to a record $14.64 billion in the three months through December, from $12.82 billion the previous quarter, the Reserve Bank of India said in a statement in Mumbai on Tuesday.
The deficit in the overall balance of payments widened to an all-time high $17.88 billion in the same quarter.