Rupee firmer as stocks zoom, trade gap narrows
11 Sep 2013
The Indian rupee continued its firm trend on the inter-bank foreign exchange market yesterday on the back of heavy inflow of foreign funds into the stock markets and reports of a narrowing of the country's trade deficit in August.
Continued FII inflows pushed the Sensex and the Nifty higher.
The Sensex closed at 19,997.10, up 727.04 points, or 3.77 per cent, as foreign institutional investors returned to the market with big picks in Auto and FMCG stocks.
The National Stock Exchange index Nifty closed 209.50 points or 3.69 per cent higher at 5,889.90.
The rupee opened higher at 64.42 a dollar, up 82 paise from the previous close of 65.24 a dollar, amidst higher capital inflows and measures proposed by the government to reduce the country's crude import bill.
India also saw a negative growth in its trade deficit, the first in recent times, with an estimated deficit of $73.37 billion in April-August 2013-14, against a shortfall of $74.67 billion in the April-August 2012-13.
Trade deficit for August 2013 narrowed to $10.9 billion.
The domestic unit was up 91 paise at 64.33 against the dollar at 3.41 pm local time on persistent selling of dollar by banks and exporters due to higher capital inflows.
Dealers said the reversal of capital control measures and inflows into domestic equity markets improved sentiment and helped prop up the domestic unit.
The RBI had partially rolled back some of the capital flow curbs imposed in August. It relaxed the limit on outward investments by allowing residents and local entities to invest up to 400 per cent of their/its net worth (up from 100 per cent earlier), provided the funds are through external commercial borrowings (ECBs).
The central bank also opened a special concessional window for swapping foreign currency non-resident banks (FCNR (B)) deposits for three years at a fixed rate of 3.5 per cent per annum.
Bullish global economic data and an easing of tensions in West Asia with signs that a US-led strike on Syria could be averted, aided market sentiment.
Besides, a firm global trend driven by a string of bullish global economic data as well as signs boosted the trading sentiment here.
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