The rupee resumed strong at 59.00 a dollar at the Interbank Foreign Exchange (Forex) market from previous close of 59.29. Later, it moved in a range of 58.62 and 59.11 before concluding at 58.79, showing a rise of 50 paise or 0.84 per cent. Previously, it had settled at 58.70 on June 19, 2013.
Foreign institutional investors (FIIs) bought a net Rs 3,634.82 crore worth equities, boosting the value of rupee. Trends show that BJP alone would end up with nearly 280 seats, first time in about 30 years that a single party will win majority in Indian Lok Sabha elections.
In straight three sessions, rupee has flared up 126 paise or 2.10 per cent. "The BJP won a clear majority in general elections leading to optimism in Indian markets," said Suresh Nair, Director, Admisi Forex India Pvt Ltd.
Standard & Poor's Ratings Services expects the new India government's reform initiatives in economic and fiscal policies in the next two to three months may have significant implications on the sovereign credit rating on India.
The recent surge in rupee has been on the back of hopes that new government will come out with investor friendly policies , which will lead to higher inflows, said Sugandha Sachdeva, AVP & Incharge- Metals, Energy & Currency Research, Religare Securities.
Meanwhile, the Indian benchmark S&P BSE sensex, which was up by 1,470 points in late morning deals, washed out major part of early gains and closed up by 216.14 points. Pramit Brahmbhatt, Veracity Group CEO said,"Rupee posted its third weekly gain in a row. The trading range for the Spot USD/INR pair is expected to be within 58.50 to 59.50."
However, some analysts appear cautious over rupee's outlook.
"While the (poll) result has been taken very positively, we maintain our year-end view of 62 for USD/INR. There is still some uncertainty about longer-term policies of the new government and whether the improvement of the INR's external balances can be sustained," HSBC Global Research said.
Meanwhile, premium for forward dollar tumbled on consistent receipts by exporters.
The benchmark six-month premium payable in October plunged to 202-204 paise from overnight close of 216.5-218.5 paise. Far forward contracts maturing in April, 2015 also slumped to 418-420 paise from 443-445 paise.
The Reserve Bank of India fixed the reference rate for dollar at 58.8610 and for the euro at 80.7166.
The rupee remained firm against the pound to end at 98.79
from 99.32 previously. It also rallied to 80.55 per euro from 81.00. The rupee improved further against the Japanese yen to 57.96 per 100 Japanese yen from 58.17.