Bloomberg News

India’s Rupee Advances After Inflation Slows to Two-Year Low

January 16, 2012

Jan. 16 (Bloomberg) -- India’s rupee rose, reversing earlier losses, on speculation foreign funds will increase purchases of the nation’s assets after inflation slowed to a two-year low.

The benchmark wholesale-price index rose 7.47 percent in December from a year earlier, after gaining 9.11 percent in November. The BSE India Sensitive Index of shares added 0.2 percent following the government report.

“The threat of higher inflation has been erased,” said J. Moses Harding, executive vice president at IndusInd Bank Ltd. in Mumbai. “Indian stocks could now appear relatively cheap and bonds still look very attractive, which will contribute to the rupee’s stability.”

The rupee advanced 0.3 percent to 51.3950 per dollar in Mumbai, according to data compiled by Bloomberg, after earlier declining as much as 0.5 percent. Foreign funds boosted holdings of Indian debt by $2.6 billion this month to a record $28.7 billion as on Jan. 12, while investments in stocks have increased by $543.1 million.

Three-month offshore forwards traded at 52.57 a dollar, compared with 52.55 on Jan. 13. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editors: Arijit Ghosh, Suresh Seshadri

To contact the reporter on this story: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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