Rupee breaks eight month jinx; settles at 59

Mumbai: Continuing with their northward journey, while the equity markets ventured into uncharted territory hitting their all time highs, the Indian rupee breached its psychological 60 level mark against the dollar for the first time in last eight months as risk averse overseas investors continued to pour money into Indian markets. Though the equity markets slipped into negative territory amidst profit booking in the intraday trade, the Reserve Bank of India’s (RBI) decision to defer the Basel 3 implementation deadline by a year triggered a strong rally in PSU banks, which helped the markets to close at their life time highs.

Hitting its record high for the fifth straight trading session, the Sensex closed the week at a new high of 22,339.97, gaining 125.06 points or 0.57 per cent amidst high bout of volatility. The NSE Nifty zoomed past its psychological 6,700 levels in the intra-day trade before ending the day at 6,695.90, gaining 54.15 points or 0.82 per cent.

Meanwhile, the partially convertible rupee staged an impressive rally against the US dollar, closing at an eight month high of 59.91, gaining 40 paise or 0.66 per cent from its previous day’s close of 60.31 per dollar. The local currency hit an intra-day high of 59.68 against the US greenback, its highest level since July 30, 2013.

“The positive momentum is expected to continue for some more weeks and I am not seeing any kind of euphoria at this point of time to turn cautious. Since it is an event based rally, there is more of short-term money that is flowing into the markets,” commented Ambareesh Baliga, managing partner, global wealth management, Edelweiss Financial Services.  
The provisional data from the stock exchanges showed that foreign institutional investors (FII) bought shares worth Rs 1,362.87 crore.  

Since the rupee has been steadily gaining ground against the US dollar for the last couple of weeks, forex participants pointed out that a cautious RBI was seen intervening in the market to bring some stability.

“There are two important issues here to note. Firstly, our exports sho-uld not suffer because of rising rupee, which could put strain on our current account deficit (CAD). Secondly, we should also have sufficient foreign exchange reserves so that we could easily tackle the kind of problems that we faced during the second half of 2013,” observed Jamal Mecklai, chief executive officer, Mecklai Financial Services. According to him, the rupee is expected to broadly move in a range of 59.80 – 62.50 per dollar in the next six months.

According to market participants, while growing hopes about a stable government at the center led by business friendly Narendra Modi is attracting lot of foreign money into domestic equity and debt papers, hopes about RBI maintaining a status quo on key policy rates in it April 1 monetary policy are also helping the markets to maintain their winning momentum.