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India’s Rupee Reverses Loss on Speculation Inflows to Continue

Dec. 4 (Bloomberg) -- India’s rupee reversed earlier losses on speculation inflows will continue as monthlong local elections for five regions end today.

Foreign investors bought a net $160 million of the nation’s debt yesterday and purchased $83.7 million more stocks than they sold, exchange data show. Goldman Sachs Group Inc. and Nomura Holdings Inc. have, over the last two months, recommended buying Indian assets saying the state elections could signal the main opposition Bharatiya Janata Party will form a new government that businesses will favor.

“There were inflows and there’s also positioning for the elections,” said Vikas Babu. Some of the money coming in was probably related to the follow-on share sale by Power Grid Corp., Babu said. The issue is fully subscribed, according to the National Stock Exchange’s website today.

The rupee rose 0.5 percent to 62.0550 per dollar in Mumbai, after dropping as much as 0.3 percent earlier, according to prices from local banks compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 25 basis points, or 0.25 percentage point, to 11.98 percent.

Voting ended today in New Delhi, the last of the five states to go to polls that are considered a test for the BJP’s prime ministerial candidate Narendra Modi, who seeks to build support before nationwide general elections next year. The results of the state elections are due on Dec. 8.

Goldman analysts including Hong Kong-based Timothy Moe on Nov. 5 boosted the bank’s stance on Indian stocks to marketweight from underweight, saying equity investors tend to view the BJP as business-friendly.

The rupee had weakened earlier today as Brent crude rose to a three-month high, causing concern that this could boost the import bill as India ships in about 80 percent of its oil.

Three-month offshore non-deliverable rupee forwards rose 0.2 percent to 63.62 per dollar, according to data compiled by Bloomberg. 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: Jeanette Rodrigues in Mumbai at jrodrigues26@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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