May 11 (Bloomberg) -- India’s rupee rose to a two-month high on optimism a nine-week rally in local shares will encourage overseas funds to increase holdings of local assets.
Data from the capital markets regulator showed share purchases by foreign funds exceeded sales on all but two of the last 21 trading days. The Bombay Stock Exchange’s Sensitive Index has rebounded 46 percent from a three-year low reached on March 9, and on May 8 rounded out the best run of weekly gains in 2 1/2 years.
“The rupee is expected to keep its positive bias as capital inflows are showing a sustained improvement,” said Sudarshan Bhatt, chief currency trader at state-owned Corporation Bank in Mumbai. “Further gains in equities will support that trend.”
The rupee strengthened as much as 0.5 percent to 49.0600 per dollar, the strongest level since Feb. 17, and traded at 49.1275 as of 9:46 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced 1.7 percent last week, the most since the five-day period ended March 20.
Offshore contracts indicate bets the rupee will trade at 49.18 to the dollar in a month, compared with expectations of 49.34 at the end of last week. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.
Overseas funds bought a net $655 million of Indian shares this month, according to data released by the Securities and Exchange Board of India.
The Reserve Bank of India estimates Asia’s third-largest economy will expand 6 percent in the fiscal year that began April 1. Gross domestic product rose 5.3 percent in the three months ended Dec. 31, the second-fastest pace among the world’s top-20 economies after China.
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