A day before RBI is scheduled to announce its third bi-monthly monetary policy for 2017-18, the rupee on Tuesday ended 10 paise higher at 64.08 to the dollar, hitting an eleven-week high. Tuesday’s level is just two paise shy of a one-year high. On May 15, 2017, the currency had closed at 64.06 to the greenback. The rupee hit a high of 64.045 during the day —11 paise short of achieving the highest intraday levels seen over the last one year at 63.93.
“The rupee is likely to remain in the range of 63.80-64.50 in the immediate future,” said a currency expert. Market participants are of the view that any further appreciation in the currency will be limited unless the investment limits in central government and corporate bonds are hiked. Yield-hungry FPIs have already utilised all the available investment limits in Indian corporate debt. Latest depository data suggests that foreign investors have pumped $17.51 billion into Indian debt since the beginning of this year while having infused $8.895 billion into equities. As a result, FPIs now have limited room to pour more funds into Indian debt. All that is left is the state development loan quota, which has seen limited utilisation. Even masala bond issuances have come to a standstill after Sebi halted all further issuances till FPI investments in corporate debt fell below 92% of the allotted quota.
FE had reported last week that the Indian Renewable Energy Development Agency received the central bank’s nod for issuing masala bonds. On Tuesday, Bloomberg reported that HDFC also received nod for issuing Masala bonds. However, according to the Sebi’s circular, issuances in this segment will only commence once the investment limit utilisation falls below 92% of the permitted quota.