The Telegraph
Tuesday , May 20 , 2014
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RBI steps in as rupee joins party

- BJP’s resounding victory inspires confidence both at home & abroad

Mumbai, May 19: The bull-run in the stock markets has lifted the rupee in its trail.

Buoyed by strong inflows from foreign institutional investors (FIIs), the Indian currency today finished at a 11-month high, though its gains were capped by dollar purchases by the Reserve Bank of India (RBI).

At the inter-bank foreign exchange market today, the unit closed at 58.59 against the greenback, a sharp gain of 20 paise from its last close of 58.79 per dollar. The currency opened strong at 58.53 per dollar from the previous close of 58.79 and moved in a range of 58.37 and 58.61 during the day. In four days, the rupee has gained 146 paise.

However, market experts said the RBI intervened later during the day and bought dollars to shore up the nation’s forex reserves. The central bank’s action in the recent past has led to forex reserves rising to nearly $314 billion for the week ended May 9.

According to forex experts, with the equity markets likely to maintain their upsurge on robust FII inflows, the domestic currency could rally in tandem. On the other hand, many are of the view that the RBI is unlikely to allow the rupee to appreciate beyond the 58 level.

FIIs have so far this month invested in excess of $2 billion and nearly $7.45 billion during the calendar year. Amid expectations of the new government undertaking reform measures and other steps to revive the economy, inflows could show an upward trend during this year. Provisional data from the stock exchanges today showed that foreign investors made net purchases to the tune of Rs 1,350 crore.

The rupee’s appreciation came on a day both the Sensex and Nifty ended at new peaks for the third session in a row. The 30-share Sensex gained over 241 points to finish at 24363.05, while the Nifty of the National Stock Exchange rose 61 points to 7263.55.

Stocks of power companies witnessed hectic action under expectations that the infrastructure sector will be the key focus area of the new government. A key highlight of the day was the rally in various mid-cap stocks.

Brokers said many large cap stocks were now adequately valued and investors were concentrating on mid-caps and small caps, which have been left out of the recent rally. The BSE Smallcap and Midcap indices closed up 4.19 per cent and 5.82 per cent, respectively, outperforming the Sensex’s 1 per cent rise.