Rupee in 63 zone, sensex posts sharpest one-day rise in 4 yrs

  MUMBAI: The rupee gained 142 paise to appreciate to 63.83 and the sensex jumped 727 points (the highest one-day rise since the 2,111-points rise on May 18, 2009) to close three points short of the 20,000-mark as a series of positive developments sharply improved sentiment in the markets. The forex and equity markets opened stronger on the back of the Reserve Bank of India's weekend measures and gained steadily on news of improved balance of trade. On the global front, Syria appeared to have averted a potential US strike by agreeing to hand over control of its chemical weapons and China reported a better-than-expected 10.4% jump in industrial output. "Today's appreciation of the rupee was largely sentiment driven. Some of the fundamental issues are still there. But the rupee should open strong tomorrow as some of the late global news has also been positive," said Ashutosh Raina, head, forex trading, HDFC Bank. He added that even at present levels the rupee continued to be undervalued. "Technically, 63.30 is a strong support level for the rupee. We have to see if it breaches this level on Wednesday." The rupee has gained in the last four consecutive trading sessions, which coincide with the start of new RBI governor Raghuram Rajan's tenure. Rajan has announced a host of measures, which include subsidizing the cost of hedging dollar deposits for banks and giving foreigners more freedom to buy shares. News that Syria had accepted Russia's proposal to give up control of its chemical weapons, thereby averting a US strike, led to a fall in oil prices. Brent crude on ICE Futures Europe was off $2.14, or 1.9%, to $111.07 a barrel. Oil prices have been a big drag on the Indian economy as it is one item where imports do not decline as prices rise. India's exports rose to a two-year high of 13% in August on account of the improved global situation, enabling trade deficit to fall to a four-month low of $10.9 billion from $14 billion in August 2012. "A significant decline in gold imports and weak capital and consumption goods' imports, due to subdued domestic demand, will help lower growth in non-oil imports during this year. Lower merchandise trade deficit, along with a healthy growth in IT/ITes exports, could help in bringing India's current account deficit in 2013-14 to even below our current forecast of 4.2% of GDP," said Crisil in a statement. On Tuesday, after Monday's holiday on account of Ganesh Chathurthi, the sensex opened below 19,450 and gained steadily to close at 19,997—up 727 points or 3.77% from its previous close on Friday. The biggest gainers on the sensex were Tata Motors, which jumped 9.88% to Rs 349, Bharti Airtel (8.15%) and Hero Motors (7.22%). Stocks gained across sectors like FMCG, auto, finance, information technology, capital equipment and healthcare. The rise in Indian markets was in tandem with the movement of global stocks. The MSCI All-Country World Index rose 0.9% in early trade in New York. Last month many policymakers, including the finance ministry and the RBI, had said that some amount of depreciation in the rupee was to be expected given the current account deficit. However, there was an unanimous view that the correction had gone way beyond fundamentals. Dealers say that the rupee is still far below its intrinsic worth and the central bank is unlikely to interfere if the currency appreciates. The next big event in the foreign exchange market is the meeting of the US Federal Reserve on September 17-18. Although last week there was a feeling that the Fed may dilute its plan to taper its $85 billion a month bond buyback, a subsequent statement by Fed officials led markets to believe that cutbacks in liquidity were on track.   TOI