Mumbai: The rupee climbed to the highest in almost a decade on speculation planned share sales by local companies will attract investment from overseas.
The currency gained for a third day on expectations portfolio managers abroad will increase their local stock holdings as companies including Reliance Power Ltd offer shares as early as this month.
Economic growth that averaged 8.6% in the four fiscal years through March 2007 fuelled the benchmark stock index, Sensex’s rally to a record on Monday.
“The India growth story still holds good and I see no reason why overseas investors will not buy stocks this year as well,” said V. Kumar, chief currency trader at state-owned State Bank of Travancore in Mumbai. “So with the flows sustaining, the rupee will be pushed further up.”
The rupee rose 0.1% to 39.29 against the dollar at close in Mumbai—the highest since 26 February 1998 from 39.31 last week, according to data compiled by Bloomberg.
The currency may rise to 39 by March, Kumar added, matching the median estimate in a Bloomberg survey of 24 strategists. Equity purchases by global funds that reached a record $17.2 billion (Rs67,596 crore) last year pushed the rupee up 12.3%—the biggest annual gain since at least 1974.
The currency was the second best performer in Asia last year, Bloomberg data show. Finance minister P. Chidambaram is hoping for growth of 9% in the year ending 31 March and in the next fiscal year, he said last week.
Reliance Power, a generating unit of India’s second biggest electricity producer by market value, plans to raise as much as $3 billion starting 15 January in the nation’s biggest initial public offering.
Jaiprakash Power Venture Ltd, a unit of India’s biggest builder of dams, may raise more than $1 billion in its first share sale.
JSW Energy Ltd, a power producer, plans to raise up to $1 billion by March and will seek regulatory approval for the share sale this month.
The rupee’s rise was limited by speculation the Reserve Bank of India (RBI) sold the currency to curb a rally that may be eroding exporters’ earnings. “The speculation is that it is only the central bank that can effectively help the dollar,” said Vikas Babu, a trader at state-owned Andhra Bank. “That brought the rupee down.”
RBI’s foreign exchange reserves climbed by $2.84 billion on 28 December to a record $275.6 billion, suggesting it was selling rupees for dollars.
Anil Varma in Mumbai contributed to this story.