Mumbai: The rupee rode a surging sharemarket and a weaker US dollar to recover from early losses on Tuesday, but a poor industrial production data and worries about the election results at the weekend prevented a sharper rally.
The partially convertible rupee settled at Rs49.26/28 per dollar, 0.50% stronger than its previous close of Rs49.52/53. In early trade, the rupee fell to Rs49.70, its weakest since 6 May.
“After the bad industrial output data and prevailing uncertainty about election results, there was no reason for the rupee to rally, except tracking major currencies gains versus the dollar, especially the sterling,” said V. Kumar, chief dealer with State Bank of Travancore.
Index of Industrial Production (IIP) fell a steeper-than-expected 2.3% in March from a year earlier, its third fall in four months.
The dollar slid to a four-month low on Tuesday as economic data strengthened a view the global recession is bottoming, boosting stocks and oil to the benefit of currencies like sterling and the Australian dollar.
Domestic markets snapped a two-day fall and rallied 4.1% to their best close in over seven months as investors began betting the Bharatiya Janata Party (BJP)-led group, which is seen as market friendly, would win national elections.
Exit polls results will be announced after the last round of voting in the month-long election on Wednesday, and this could lead to more volatility, if there was no clear winner, dealers said. Election results are due on Saturday.
“With equations changing day by day, a hung parliament seems very much on the cards, which adds to the bearishness on the rupee,” Kumar said.
One-month offshore non-deliverable forward contracts were quoting at 49.42/52, slightly weaker than the onshore spot rate.