Bloomberg News

India’s Rupee Set for Second Weekly Gain as Asset Inflows Rise

February 26, 2012

Feb. 24 (Bloomberg) -- India’s rupee headed for a second weekly advance after foreign investors stepped up purchases of the nation’s bonds and stocks.

Overseas funds lifted holdings of rupee-denominated notes by $98 million on Feb. 21 and 22, following net sales of $275 million last week, according to data from the Securities & Exchange Board of India. Offshore investors bought $501 million more local shares than they sold during the two days, exchange data show. Financial markets were closed on Feb. 20.

“Inflows into debt are boosting the rupee,” said Naveen Raghuvanshi, a currency trader at Development Credit Bank Ltd. in Mumbai. “Sentiment is positive, and equity flows are supportive too.”

The rupee advanced 0.6 percent this week and 0.4 percent today to 48.9900 per dollar as of 9:30 a.m. in Mumbai, according to data compiled by Bloomberg. The currency has strengthened 8.3 percent this year.

The Securities & Exchange Board of India auctioned $5 billion of corporate debt-purchase quotas on Nov. 30 to foreigners, who must utilize the allocations by Feb. 28 or let them expire. Foreign funds pay a fee for the right to buy rupee- denominated government and corporate bonds. India’s market regulator conducts the auctions with no fixed schedule, and the quota system is designed to discourage speculative capital.

Three-month offshore non-deliverable rupee forward contracts traded at 50.01 a dollar from 50.22 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

--Editors: Andrew Janes, Simon Harvey

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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