The Rupee strengthened past the 60 to the dollar mark for the first time in eight months on election cues and a wider regional groundswell as China indicated it would take steps to protect economic growth.
Foreign institutional investors (FIIs) have been pumping funds into the Indian capital markets, anticipating a push in economic reforms after the April-May election. Gains in Asian and European stocks also boosted sentiment on the domestic bourses. Market sentiment has been buoyed by opinion polls that have put Bharatiya Janata Party and its prime ministerial candidate Narendra Modi ahead in the race.
So far in March, Rs.20,700 crore has gone into Indian equities from overseas, the highest monthly inflow in a year. The Sensex gained 125.60 points, or 0.57%, to 22,339.97 while the Nifty rose 54.15 points to 6,695.90.
Both BSE Midcap and Small-Cap indices, which rose more than 1% each, outperformed the Sensex.
The Sensex gained in four out of five sessions in the week ended March 28. Broadly, cyclical stocks such as capital goods, infrastructure and state-owned banks found favour even as defensives such as IT, FMCG and pharma underperformed the market.
The Sensex is up 5.4% this quarter, beating indices in Brazil, Russia and China, according to Bloomberg data. Investors are going to be watching what the central bank does on April 1, when it’s scheduled to make its next monetary policy announcement.
Pressure on RBI has eased as retail inflation has slowed to a two-year low in February while wholesale inflation is the lowest in nine months. Also, the current account and fiscal deficits for the fiscal year have been successfully reined in, according to the government.
The local currency gained nearly 13% from its record low of 68.80 per dollar on August 28 last year before Raghuram Rajan took over from Duvvuri Subbarao as the RBI governor. Rajan’s direction and government measures have been credited with helping the rupee recover.
It ended Friday at 59.93 to the dollar against the close of 60.13 on Thursday. The last time it was below 60 was in July 30, 2013, when it was at 59.40.
RBI mobilised more than $34 billion between September and November last year through a special swap window introduced by Rajan within days of his assuming charge in September. India’s forex reserves are within striking distance of the $300-billion mark, thanks to heavy dollar buying by the central bank. Reserves stood at $298.636 billion at the end of March 21, $1.348 billion more than the preceding week. Forex reserves have risen about $28 billion since August 30 last year.
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