Rupee closes higher against US dollar, bond prices rise
Mumbai: Indian government bond prices and rupee gained on Wednesday on the back of better-than-expected key macroeconomic data.
The rupee closed at 64.09, up 0.35% from its Monday’s close of 64.32. The rupee opened at 64.17 a dollar. On Tuesday, markets were closed due to Mahashivratri.
Yield on the 10-year bond fell to 7.491% from its previous close of 7.499%. Bond yields and prices move in opposite directions.
The benchmark Sensex index fell 0.42%, or 144.52 points, to 34,155.95. So far this year, it has risen 0.3%.
India’s factory output grew at a robust 7.1% in December on the back of high manufacturing production, while retail inflation slowed to 5.07% in January as food inflation softened, according to government data released on Monday.
In November, the Index of Industrial Production grew 8.8% and Consumer Price Index (CPI)-based inflation rose by 5.21%.
“Inflation throws no surprises. CPI inflation in January expectedly eased, and is likely to ease further in the rest of FY2018. However, factors such as monsoons, rebound in crude oil prices, MSP increases and global financial conditions would impact inflation outturn in 1HFY19”, said Kotak Economic Research on 12 February in a report to its investors .
“We expect inflation to head towards 5.85% by June 2018 before gliding back to 4.41% by March 2019. We maintain our call for monetary policy status quo contingent on inflation outcome,” the report added.
So far this year, the rupee has fallen 0.4%, while foreign investors have bought $1.23 billion and $2.08 billion in local equity and debt markets, respectively.
Traders will be cautious ahead of Wholesale Price Index (WPI) data due on 15 February after 12pm. According to Bloomberg estimates, WPI will be at 3.2% for January from 3.58% a month ago.