Rupee Rises From Two-Week Low on Outlook for Inflows From Abroad

India’s rupee rose from a two-week low after the government said it will seek overseas investment to modernize its rail network, stoking speculation the new administration will unveil more steps to lure foreign capital.

Rail Minister Sadananda Gowda today said investors abroad will be allowed to invest in all railroad infrastructure, barring actual operations of the trains. The general budget, due to be presented by Finance Minister Arun Jaitley on July 10, may contain more such proposals in other industries, said Ankur Jhaveri, co-head of currency and rates in Mumbai at brokerage Edelweiss Financial Services.

“Expectations for a growth-friendly budget are adding to the sentiment and helping the rupee,” Jhaveri said. “The government is likely to allow higher overseas investment in different businesses including railways, and unveil other polices aimed at boosting manufacturing.”

India’s currency rose 0.4 percent to 59.79 per dollar in Mumbai, according to data from local banks compiled by Bloomberg.

The rupee pared today’s gains of as much as 0.6 percent as stocks tumbled the most in five months amid speculation the recent gains that sent the benchmark index to a record high yesterday may have been too quick. The S&P BSE Sensex (SENSEX) slumped 2 percent today, paring this year’s rally to 21 percent.

Gowda also scaled back the proposed borrowing for Indian Railways for this fiscal year and announced a high-speed train to connect the financial hub of Mumbai with Ahmedabad in Gujarat. The proposals have the potential to bring in investments from companies such as General Electric Co. and Bombardier Inc.

Overseas investors have pumped about $22 billion into local stocks and bonds this year, the largest inflows in Asia, exchange data show.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 16 basis points, or 0.16 percentage point, to 7.36 percent in Mumbai, according to data compiled by Bloomberg.

Three-month offshore non-deliverable contracts gained 0.2 percent to 60.60 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

To contact the reporter on this story: Kartik Goyal in Mumbai at kgoyal@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Sam Nagarajan, Arijit Ghosh

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