Rupee slides for third day on inflow concerns

Rupee slides for third day on inflow concerns
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First Published: Wed, Jun 27 2007. 12 43 AM IST
Updated: Wed, Jun 27 2007. 12 43 AM IST
The rupee fell for the third day on Tuesday on speculation that stock market inflows will decline after companies completed new share offerings that attracted overseas money.
The currency had gained for the past two weeks as ICICI Bank Ltd, the nation’s most valued financial company, and real estate developer DLF Ltd offered to sell shares worth a total $6.6 billion (Rs27,060 crore). Mumbai-based ICICI’s $4.3 billion sale was the biggest equity offering by an Indian company.
“The rupee’s advance may be over,” said Krishnamurthy Harihar, head of treasury at Mumbai-based Development Credit Bank Ltd. “The view in the market is that most of the inflows related to the ICICI and DLF share sales have already come. More inflows are unlikely for now,” he added.
The rupee fell 0.2% to 40.945 against the dollar as of 5pm in Mumbai. It had dropped as low as 41.02 earlier. The rupee’s 8.1% advance this year is the third-best among Asia-Pacific currencies.
ICICI Bank’s share sale, which closed on 22 June, attracted bids for more than 10 times the offer size, according to the National Stock Exchange. The DLF sale closed on 14 June and was subscribed 3.5 times. The share sales attracted more overseas investment to the local stock market. Global funds bought equities worth an average $109 million a day more than they sold last week, compared with $18 million during the previous week, according to data released by market regulator Securities and Exchange Board of India.
The rupee pared losses on speculation that the nation’s economic growth will attract more investment from abroad. The Indian economy expanded 9.4% in the year through March, the fastest since 1989, according to the government.
“The chances of rupee gains still remain good because of the continuing inflows of investment,” said Prakash Rao, head of currency trading at UTI Bank Ltd in Mumbai.
Monthly inflows of direct investment averaged $1.3 billion in the fiscal year ended 31 March, compared with $461.7 million in the previous year, according to government data.
Indian companies are raising money abroad to fund business expansion back home as the country grows at the second fastest pace among the world’s major economies. Overseas borrowing by Indian firms rose 59% to $5.1 billion in March from the previous month, according to the central bank.
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First Published: Wed, Jun 27 2007. 12 43 AM IST
More Topics: Money Matters | Currency |