Rupee Caps Best Week Since March as India Stock Inflows Surge

  • Overseas investors net buyers of $592 million shares in June
  • ‘Market gung-ho about the good prospects of monsoon”: RBL

India’s rupee completed its biggest weekly advance since March as the prospects of faster economic growth and strong monsoon rains lure foreign investors to the nation’s stocks.

Overseas funds have poured a net $592 million into shares this month, data compiled by Bloomberg show. That’s taken purchases since March 31 to $1.56 billion, the highest in five quarters. Inflows may continue as the benefits of Prime Minister Narendra Modi’s policies emerge in corporate earnings reports, investors including Mark Mobius and BNP Paribas SA have said. The rupee has strengthened in June after a two-month decline.

The June-September seasonal monsoon rains, which account for more than 70 percent of India’s annual rainfall and water about half the crop land in the country, reached the southern state of Kerala on Wednesday. Modi is counting on the showers, forecast this year to be the strongest since 1994, to boost farm output and ease a drinking water shortage caused by back-to-back droughts. 

“The market is gung-ho about the good prospects of the monsoon, which is definitely positive for stocks and the rupee,” said Rohan Lasrado, Mumbai-based head of foreign-exchange trading at RBL Bank Ltd. “The dovish statements by Federal Reserve officials and weak U.S. employment data have also helped drive flows back into emerging markets.”

The rupee strengthened 0.8 percent from June 3 to 66.76 a dollar in Mumbai, according to prices from local banks compiled by Bloomberg. That’s the biggest weekly jump since the period ended March 18. It slipped 0.1 percent on Friday and remains Asia’s worst performing currency in 2016 after the yuan, with a 0.9 percent drop.

Sovereign bonds were little changed this week and on Friday, with the yield on notes due January 2026 at 7.49 percent, prices from the central bank’s trading system show. That’s the highest since March 30. The Reserve Bank of India kept benchmark borrowing costs unchanged at a five-year low on Tuesday, while saying that the “surprise” pick-up in consumer inflation to a three-month high in April made “the future trajectory of inflation somewhat more uncertain.”

India’s government sold 150 billion rupees ($2.2 billion) of debt at an auction Friday, according to a central bank statement.

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