Bond prices rise, rupee rebounds

MUMBAI: Positive comments from Union finance minister P Chidambaram caused bond prices to rise marginally while inflows from offshore markets helped the rupee recoup its early losses.

Bond yields eased as the finance minister announced that the government would act against any impact which a recession in the US would have on the Indian economy. The yield on the benchmark bond, the 7.99% bond maturing in 2017, ended the day at 7.55%, a notch below Wednesday’s close of 7.56%.

The foreign exchange market saw considerably activity on Thursday. The rupee ended the day at 39.30/31 levels against the dollar, a notch below Wednesday’s close of 39.29/30 levels. The rupee opened the day at 39.30 levels in the local market.

However, there was an arbitrage of 8-9 paise between the domestic market and the market for non-deliverable forwards (NDFs). This prompted multinational banks to buy dollars in the local spot market and sell them at the NDF market, said market sources.

Such transactions caused the rupee to weaken to as low as 39.35 levels during the day. Subsequently, heavy inflows of foreign capital, subscribing to the ongoing Reliance Power public offer pushed the rupee up to 39.26/27 levels.

It was, at this point, that the central bank intervened through nationalised banks which saw the rupee trail back to 39.30 levels. Meanwhile, the BSE Sensex continued to be on a downward journey, raising fears of a pullout by overseas funds.