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Rupee gains on corporate dollar sales; higher shares

Last updated on: May 06, 2014 17:46 IST

RupeeThe rupee gained on Tuesday for its fourth session in five, aided by corporate dollar sales and stronger domestic shares, although continued caution ahead of the outcome of general elections next week limited sharper gains.

Traders said market volumes remain thin and beholden largely to foreign fund flows or to large corporate flows in the run-up to the result of the general elections on May 16.

Markets have priced in a narrow victory for the opposition Bharatiya Janata Party and its allies in the 543-seat lower house of parliament.

That could raise the prospect of a sell-off should election outcomes disappoint, as the rupee is trading at close to one-month highs while shares are not far from the record highs hit in April.

"Market is thin and being driven primarily by flows and not so much by election-related views," said Navin Raghuvanshi, associate vice president at DCB Bank.

"Until the election results we could see the rupee hold in a tight 60.00 to 60.45

range," he added.

The partially convertible rupee closed at 60.11/12 per dollar compared to its previous close of 60.21/22.

The currency rose to as high as 60 to the dollar on Monday, which was its highest since April 9.

Some dollar selling by a large corporate was seen in the second half of the trading session, helping the local unit recover from the session low of 60.23.

The rupee was also aided by shares that rose for a second consecutive session after overseas investors bought index futures worth 860 million rupees ($14.29 million) on Monday, snapping five days of selling in index futures.

However, traders cited little impact after the HSBC Services Purchasing Managers' Index compiled by Markit, rose to 48.5 in April from 47.5 in March, but held stubbornly below the 50-mark that divides growth from contraction.

In the offshore non-deliverable forwards, the one-month contract was at 60.48 while the three-month was at 61.23.

Swati Bhat in Mumbai
Source: REUTERS
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