Rupee rises as Sensex continues to rally

Rupee rises as Sensex continues to rally

The rupee rounded off gains this week as local stocks rallied to a record after the capital markets regulator on Thursday eased rules on some overseas funds buying the nation’s equities.

The currency gained for the fourth day after the Securities & Exchange Board of India (Sebi) said pension funds, universities, charitable institutions and foundations that aren’t regulated overseas will be able to register in India as investors. Curbs on offshore derivatives failed to damp demand for local assets, enabling the benchmark stock index to post the biggest weekly gain in more than six years.

“They are making it less onerous for these class of long- term investors to bring in their money," which may help the rupee strengthen, said Thio Chin Loo, senior currency strategist at BNP Paribas SA in Singapore. “The outlook for the Indian economy is still strong and I can’t see why the rupee shouldn’t perform well."

The rupee climbed 0.7% this week to 39.4575 against the dollar at the close of trading in Mumbai, according to data compiled by Bloomberg. The currency may end the year at 38.50, the strongest in more than a decade, Thio said.

Sebi, in a bid to stem the inflows, had on Thursday scrapped those notes linked to futures and options and capped investments backed by equities. Sebi chairman M. Damodaran also told funds to register themselves with local regulators. The restrictions confirmed proposals made on 16 October that sent stocks and the rupee tumbling the following day. The benchmark BSE’s Sensitive Index, or Sensex, rebounded 9.6% this week to Friday’s all-time high following a loss of 4.7% in the five days ended 19 October. Economic growth, estimated at 9.4% this year, may keep attracting investors from abroad and push the rupee to a decade high of 39 by year-end, said Sean Callow, a currency strategist at Westpac Banking Corp. in Singapore.