Mumbai: India’s rupee rose to the highest in more than three weeks on signs overseas investors, who sold a record amount of local equities in August, are returning.
The currency gained as net equity investment by funds abroad in the first two days of this week amounted to 83% of their purchases during the whole of last week. The rupee and the benchmark stock index have both rallied since 17 August even as the contagion from the US subprime mortgage market spread. A report last week showed India’s economy grew more than expected in the second quarter.
“The rupee is stronger because of capital inflows, mostly stock related,” said Kishore, deputy manager of Andhra Bank Ltd. in Mumbai, who uses only one name. “The stock market is doing well and that should attract more flows.”
The rupee rose 0.3% to 40.80 per dollar in Mumbai, according to data compiled by Bloomberg—the highest since 14 August.
Overseas investors bought Indian equities worth $286.6 million (Rs1,175 crore) more than they sold during the first two days of this week, compared with $343.6 million during the whole of last week, according to data from the Securities and Exchange Board of India (Sebi).
The Bombay Stock Exchange’s Sensitive Index, or the Sensex, rose to the highest in a month on Thursday, heading for the third weekly advance. The Sensex gained 1.1% to reach 15,616.31.
India’s economy expanded 9.3% in the three months through June, compared with 9.1% in the previous quarter, a government report showed on 31 August. Analysts had expected a 9% gain. The rupee also gained as exporters took advantage of the currency’s decline in August to buy it cheap, Kishore said. The rupee fell 1.3% last month—its biggest monthly decline since May 2006. Bloomberg