Rupee rises to near eight-month high on strong foreign inflows

Written by Agencies | Mumbai | Updated: Mar 25 2014, 06:14am hrs
The rupee advanced to the strongest level in almost eight months on a closing basis and government bonds advanced on optimism easing inflation and the prospect of a growth-galvanizing new government will attract inflows.

Global funds pumped $2.9 billion into Indian stocks and bonds this month, helping push the S&P BSE Sensex to a record high on Monday before a central bank interest-rate review on April 1 and elections set to start April 7.

The possibility that price pressures may resurface, keeping borrowing costs high and consumer spending subdued, is the key risk to the rally, according to DBS Bank.

The rupee rose 0.2% to close at 60.7875 per dollar in Mumbai, prices from local banks compiled by Bloomberg show. It touched 60.6450 in intra-day trading, the strongest level since March 11. The yield on the 8.83% sovereign bonds due November 2023 fell 1 basis point to 8.78%, according to the central banks trading system.

The new governments economic priorities will set the economy on course for a gradual recovery, Radhika Rao, an economist at DBS in Singapore, wrote in a research note on Monday. The most favoured outcome for the financial markets will be a decisive majority, possibly led by the opposition party, according to the various private opinion polls.

Economic concerns have put the ruling Congress party behind the BJP in public opinion surveys.

Narendra Modi, the BJPs prime ministerial candidate, is campaigning on the basis of his 13-year role as chief minister of Gujarat, a state that has outpaced the national economic growth rate for the last six fiscal years.