Rupee rises as share sales fuel capital inflow hopes

The rupee rose toward a six-month high on optimism overseas investors will purchase the stocks of local companies at upcoming share sales, adding to the record amount invested this year.

The currency gained 0.4% to 44.5150 per dollar at the close of trade on Wednesday. It earlier reached 44.265, approaching a six-month high of 44.23 touched on October 4. The currency surged 4.6% in the past month, the second-best performance after South Korean won among the 10 most-traded Asian currencies.

The government is preparing to sell equities in Coal India and SAIL is also planning an offering. The currency snapped a two-day loss as investors increased holdings of Indian stocks every day since August 27 through October 4. Inflows so far in 2010 total more than $20 billion.

“Capital inflows are already strong and the expected share offerings will only add to that trend,” said Sudarshan Bhatt, Mumbai-based chief foreign-exchange trader at Corporation Bank. “The rupee will extend its rally.

Offshore forwards indicate the rupee will trade at 44.96 to the dollar in three months, compared with expectations of 45.18 on Tuesday.

Disinvestment secretary Sumit Bose said on September 28 that the price range for the Coal India offer may be decided by the second or third week of October. Steel Authority of India may sell stock in November, chairman CS Verma said last month.

The dollar index, which tracks the greenback against the currencies of six major US trading partners, fell 0.9% on Tuesday. It was little changed at 77.75 on Wednesday.