India’s rupee rose toward a one-month high on speculation the world’s largest democracy will elect a government capable of reviving growth.
The main opposition Bharatiya Janata Party is leading in opinion polls before election results due May 16, signaling voters will punish the ruling Congress party for corruption scandals and an economic slowdown. Voting began April 7 and will be completed May 12. India’s S&P BSE Sensex index of shares rose 0.3 percent as exchange data showed global funds bought a net $131.8 million of local equities this month through yesterday.
“The main trigger to decide the rupee’s future trend is the poll outcome and until then, it is likely to trade in a narrow range,” said Subramanian Sharma, a director at Greenback Forex Services Pvt. in Mumbai. “If the BJP-led government is elected with a majority, we see the rupee appreciating to 59.20 as they may revive economic growth.”
The rupee gained 0.2 percent to 60.0975 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. It touched 60.0550 earlier, approaching yesterday’s high of 59.9975 that was the strongest since April 9. The currency is unlikely to appreciate beyond 60 as importers step up dollar purchases around those levels, according to Sharma.
The BJP and its allies may take 275 of 543 parliamentary seats up for grabs, three more than they need for a majority, according to a Hansa Research survey for the NDTV television channel released April 14. Previous polls have shown the BJP and its partners winning the most seats while falling short of the 272 needed for a majority.
One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, declined 23 basis points, or 0.23 percentage point, to 11.5675 percent, according to data compiled by Bloomberg.
Three-month offshore non-deliverable forwards on the rupee advanced 0.1 percent to 61.19 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 the greenback.