India Rupee Drops, Bonds Gain as GDP Lags Estimates; Stocks RiseJeanette Rodrigues, Shikhar Balwani and Rajhkumar K Shaaw
India’s rupee fell and bonds advanced after a report showed the nation’s economic growth slowed more than economists predicted. Stocks rose as fading prospects of an imminent strike on Syria eased oil prices.
Gross domestic product rose 4.4 percent in the three months through June from a year earlier, an official report showed Aug. 30. The median of 44 estimates in a Bloomberg survey was for a 4.7 percent gain. A weak rupee and higher crude prices may stoke inflation as the nation imports about 80 percent of its oil, heightening concerns as global funds sell Indian assets amid signs the U.S. is preparing to pare stimulus.
“Growth is clearly a concern and the latest data only affirm it,” said Srinivasa Raghavan, Mumbai-based executive vice-president of treasury at Dhanlaxmi Bank Ltd. Raghuram Rajan, who takes charge as governor of the Reserve Bank of India on Sept. 5, “has a task at hand,” Raghavan said.
The rupee weakened 0.5 percent to 66.0150 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. The currency plunged 8.1 percent last month, the biggest drop since March 1992 and the steepest among 78 global currencies tracked by Bloomberg. It touched an unprecedented 68.8450 on Aug. 28.
The yield on the 7.16 percent bonds due May 2023 fell 13 basis points, or 0.13 percentage point, to 8.46 percent. The S&P BSE Sensex gained 1.4 percent to 18,886.13. Brent crude slid as much as 1.6 percent.
HSBC Holdings Plc today lowered its economic growth forecast for India following cuts by UBS AG, Standard Chartered Plc and BNP Paribas SA last week. Global funds withdrew a net $2.4 billion from local stocks and bonds in August, leaving the rupee vulnerable to the nation’s current-account deficit.
The U.S. may trim monthly bond purchases this month and end the buying by mid-2014, according to a Bloomberg survey of economists before the Federal Open Market Committee meets Sept. 17-18. President Barack Obama said he will seek authorization from Congress before ordering military action against Syria, easing concern that an imminent strike would disrupt oil shipments from the Middle East.
“September will bring a lot of event risk for financial markets to absorb,” Tim Fox, chief economist at Emirates NBD in Dubai, wrote in a research report today. “The rupee continues to remain under pressure.”
ICICI Bank Ltd., the country’s second-biggest lender, rose the most in almost three weeks. ITC Ltd., India’s biggest cigarette company which has the highest weighting on the Sensex, rallied the most since July 4. Reliance Industries Ltd., owner of the world’s largest oil-refining complex, climbed to a five-week high.
HSBC now sees Asia’s third-largest economy growing at 4 percent in the year through March 2014, compared with an earlier estimate of 5.5 percent. Standard Chartered predicts India’s GDP will increase 4.7 percent versus 5.5 percent, UBS cut its projection to 4.7 percent from 5.2 percent and BNP to 3.7 percent from 5.2 percent.
One-month implied volatility in the rupee, a measure of expected moves in the exchange rate used to price options, rose 53 basis points today to 21.26 percent. The rupee surged 4.8 percent in the two days through Aug. 30, as the central bank started selling dollars to the largest state-run oil importers through foreign-exchange swaps.
Three-month onshore rupee forwards rose 0.1 percent to 67.57 per dollar, data compiled by Bloomberg show, Offshore non-deliverable contracts advanced 1.8 percent to 68.23. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.