Mumbai: The Indian rupee closed at a five-month high as overseas investors added to their local stock holdings, betting Prime Minister Manmohan Singh will be more successful with economic reforms in his second term.
The currency extended this week’s gains to 4% as equity purchases by foreigners exceeded sales on all but three of the 28 trading sessions through 18 May.
Several regional political parties have offered to support the Congress-led coalition, which returned to power with an increased majority, spurring optimism that Singh will push through policies to revive growth and attract investment from overseas.
The rupee has a positive outlook as economic reforms are expected to accelerate, said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai.
The rupee strengthened 0.6% to 47.49 per dollar at close in Mumbai, according to data compiled by Bloomberg.
The Indian currency’s 5.5% gain this month is the best performance among the 10 most-active currencies in Asia outside Japan.
Foreigners have bought a net $2 billion (around Rs9,545 crore) of Indian equities this month, adding to April’s $1.6 billion, according to the Securities and Exchange Board of India. The Bombay Stock Exchange bellwether Sensex index has gained 15.5% this week.