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Business News/ Market / Stock-market-news/  Sensex, Nifty rise as Brexit poll, FDI easing counter Raghuram Rajan exit
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Sensex, Nifty rise as Brexit poll, FDI easing counter Raghuram Rajan exit

Rupee ends weaker as investors reacted to RBI governor Raghuram Rajan's decision to demit office after his term ends in September

The S&P BSE Sensex climbed 0.91%, or 241.01 points, to 26,866.92 at the close in Mumbai, erasing an intraday drop of 0.7%. Photo: ReutersPremium
The S&P BSE Sensex climbed 0.91%, or 241.01 points, to 26,866.92 at the close in Mumbai, erasing an intraday drop of 0.7%. Photo: Reuters

Mumbai: The Indian rupee weakened on Monday as investors reacted to Reserve Bank of India (RBI) governor Raghuram Rajan’s decision to demit office after his term ends in September.

Equity markets, which started the day lower, later recouped losses and closed higher on hopes that Britain may vote to stay in the European Union later this week.

BSE’s benchmark 30-share Sensex rose 241.01 points, or 0.91%, to 26,866.92, while the National Stock Exchange’s 50-share Nifty advanced 0.84% to close at 8,238.50 points.

Earlier in the day, the Sensex had shed as much as 0.67%, while the Nifty had declined 0.77% in a knee-jerk reaction to Rajan’s unexpected exit.

The local currency closed at 67.32 against the dollar, down 0.35% from its previous close of 67.09. In morning trade, the local currency fell as much as 0.9% to touch a low of 67.69 a dollar—a level last seen on 24 May.

The rupee ended off lows on talk that RBI sold dollars through public sector banks to stem the currency’s fall.

While the currency recovered on Monday, analysts feared that an impending change in the leadership at the central bank would leave the currency on a weak footing.

“The most likely casualty of Rajan’s exit would be the INR," Saurabh Mukherjea, chief executive officer of institutional equities at Ambit Capital Pvt. Ltd said in an email.

Mukherjea pointed out that India faces a potential $25 billion in outflows when FCNR (foreign currency non-resident) deposits raised in 2013 matures in a time when India’s capital account surplus has been diminishing quarter after quarter and is now close to zero; and the rupee appears to be overvalued by 4% from an REER (real effective exchange rate) perspective.

Others also expect the rupee to trade with a depreciating bias.

“In the near term, we expect the INR to underperform most currencies in the region, irrespective of the Brexit vote outcome. We haven’t made any changes to our forecasts recently. Our forecasts remain 67.75 for end-June and 68.25 for end-September," Divya Devesh, Asia FX Strategist at Standard Chartered Bank, said in an email response.

Meanwhile, equity markets recovered from a lower opening in response to a relief rally across global equities. Sentiment improved after exit polls on the weekend showed that Britain may vote to remain in the euro zone on Thursday.

Back home, markets got a boost from the government’s decision to relax foreign direct investment norms in a number of key sectors, including aviation and defence.

“Markets ended the day higher, despite the negative surprise of the RBI governor leaving office after completing his term in September," said Dipen Shah, senior vice-president and head of private client group research at Kotak Securities Ltd.

“Markets were bolstered by the expectations of a positive outcome from the Brexit poll. FDI relaxations by the government in several sectors buoyed sentiments that reforms were continuing. Advance of the monsoon has also helped the markets," Shah pointed.

On Monday, BSE IT index was the top gainer with a 2% rise, as a depreciating rupee could boost software exporters’ revenues. BSE Telecom index followed next with a 1.98% gain.

Among Sensex stocks, Tata Motors Ltd and Tata Steel Ltd rallied the most on waning fears of Brexit. They climbed 3.98% and 3.27%, respectively. Telecom operator Bharti Airtel Ltd and software services exporter Infosys Ltd rose 2.60% and 2.57%, respectively.

Provisional data from NSE suggested that foreign institutional investors (FIIs) sold a net of 537.46 crore on Monday, while domestic institutional investors (DIIs) bought a net of 724.06 crore of local shares.

Year to date, FIIs have been net buyers of $2.82 billion of shares, while DIIs have pumped in a net of more than 10,000 crore in domestic equities.

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Published: 20 Jun 2016, 10:09 AM IST
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