Stock Rally Fuels Indian Rupee’s Biggest Advance in Two Weeks

Updated on
  • Benchmark S&P BSE Sensex of shares enters a bull market
  • Indian equities will attract more inflows, Religare says

India’s rupee rose the most in almost two weeks amid optimism a rally that propelled local stocks to a bull market will lure more foreign inflows.

The benchmark S&P BSE Sensex index of shares surged 1.8 percent to its highest close since August, tracking gains across emerging markets after a stronger-than-expected U.S. jobs report improved confidence in the world’s largest economy. Overseas funds have already poured a net $3 billion into Indian stocks in 2016, data compiled by Bloomberg show, amid expectations that above-average monsoon rains will help boost corporate earnings and economic growth. Sovereign bonds were little changed.

“The overall picture seems to be pretty rosy for Indian equities and that will attract more inflows into shares,” said Gaurav Sharma, a senior currency analyst at Religare Commodities Ltd. in Noida, near New Delhi. “Improved risk appetite, because of the surge in global and local stocks, is getting reflected in the rupee.”

The Indian currency appreciated 0.4 percent, the most since June 29, to 67.1350 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. That pared its loss this year to 1.5 percent. The yield on 10-year government bonds was at 7.38 percent, little changed from Friday, when the securities capped the longest stretch of weekly gains since April.

Religare predicts the rupee will appreciate to 65.50 a dollar by the end of 2016, Sharma said. Strong recent showers have taken rainfall for the monsoon season that began June 1 to 1 percent above normal as of July 10, compared with a deficit of 25 percent seen mid-June. The four-month spell affects both summer and winter sowing in India.