Mumbai: Suspected central bank intervention prevented the rupee from hitting a decade high against the dollar on Monday, dealers said after they had aggressively bought the rupee in anticipation of strong overseas investment flows.
The rupee climbed on Monday, as traders positioned for strong overseas inflows, including those for Reliance Power’s initial public offering later this month, despite large falls in global equity markets.
At 10:20 am, the partially convertible rupee was at 39.265/275 per dollar, driven quickly lower from a peak of 39.20.
At 9:45 am, the rupee was at 39.310/315 per dollar, strengthening from the previous close of 39.34/35, and moving towards a near-decade high of 39.16 hit in November.
“The market is mature enough to understand that even a 2% fall in the Dow is not likely to spill into Indian markets,” said the chief dealer with a corporate, referring to the United States’ benchmark share index.
The Indian stockmarket fell more than 1% in opening deals on Monday, but expectations of good corporate results starting this week and new year fund allocations by foreign investors were expected to lend support.
US stocks tumbled on Friday, dragging the Dow to its worst three-day start to a year since the Great Depression, as a sharp rise in the unemployment rate heightened fears the world’s largest economy is headed into a recession.
That drove Asian stocks lower on Monday, but Indian dealers brushed off the negative overseas cues.
Reliance Power, 50% owned by utility Reliance Energy Ltd, could raise up to $3 billion this month, making it India’s biggest-ever IPO, and dealers say bids worth about $1 billion by foreign investors are likely to be accepted.
Capital inflows into the stock market were a key driver of the rupee’s rise of more than 12% last year. Foreign funds bought $17.4 billion of India equities in 2007, a record for a single year.
Still, concerns over record oil prices, and central bank intervention prevented the market from taking large positions in the local unit, dealers said.