Rupee soars past 44 on heavy FII inflows

The rupee surged to its highest level in more than two years against the dollar, notwithstanding a weak stock market and suspected RBI intervention, as foreign inflows are expected to shoot up in light of the Coal India IPO. The partially convertible Indian currency closed at 44.1050 per dollar, after touching a day's high of 43.9750, its highest since September 2008. It opened at 44.2550 and touched a day's low of 44.2675. It had closed at 44.12 on Thursday. It had closed at 44.4350 on October 8. Demand by local oil companies limited the gains in the rupee, according to reports. Traders and dealers are also closely watching the Reserve Bank of India (RBI), which had bought dollars to stem the rupee's strength on Thursday.



The rupee is expected to extend its recent ascent as foreign capital inflows will increase amid a slew of big-ticket public issues, including some of the top state-run companies such as Coal India, Power Grid Corp. and SAIL. Coal India, the world’s largest producer of the commodity, plans to raise as much as Rs151.3bn (US$3.4bn) in India’s biggest IPO that opens Oct. 18. Local companies have raised a record Rs806bn in equity and rights issues this year. Reliance Industries Ltd., the nation’s largest company by market value, has raised US$1.5bn in dollar-denominated debt, the company said. It may be recalled that recently, the Government had doubled the FII limit in government and corporate bonds.

FIIs have already pumped in more than US$22bn into the Indian equities and over US$10bn into bonds so far this year. This has sent the rupee soaring about 6% since the start of September, and around 5.6% year-to-date. On Tuesday, the rupee had touched its lowest level in a week (44.77) against the dollar after a weaker-than-expected IIP data sent local shares tumbling amid concerns about the pace of the Indian economy. India's industrial output, as measured by the index of industrial production (IIP), grew by just 5.6% in August 2010 after expanding by an impressive 15.2% in July. In June 2010, the IIP growth stood at 5.8%. IIP grew by 10.6% in August 2009.