Sensex ends 290 points higher as rupee nears 65/dollar

The BSE Sensex closed 1.5 per cent higher, its third straight day of gains, tracking the sharp rise in the Indian rupee. The Sensex closed 290 points higher, while the Nifty advanced 87 points as the rupee gained near 65 per dollar mark on Thursday.

The benchmark Sensex has now gained over 1,000 points in the last three days as the rupee has rose from a low of 68.60 on Wednesday to a high of 65.02 on Friday.

Banking stocks led the gains again, with the Bank Nifty rising nearly 3 per cent as the Reserve Bank of India raised overseas borrowing limits for lenders as part of a slew of measures unveiled by new governor Raghuram Rajan late Wednesday.

Private lender ICICI Bank ended 7 per cent higher, while IndusInd Bank gained 4 per cent.

Market analyst Avinash Gorakshakar told NDTV that markets could run up on a continuous basis till the RBI policy is announced on September 20, but the rupee will be the key.

The rupee has gained sharply since Dr Rajan unveiled a spate of measures to attract more inflows. The new steps to defend the rupee included a concessional forex swap rate to banks for attracting deposits from overseas Indians.

"The governor's action plan was well accepted by market participants," said Shakti Satapathy, a fixed income strategist with AK Capital.

"But the key would be the government's intent in addressing the CAD (current account deficit) and subsidy burden at a faster pace amidst positive U.S data points that might lead to an early exit by Fed's from the stimulus measures," he added.

Fears of tapering in the U.S. have roiled emerging markets such as India for months, prompting foreign investors to sell currencies, stocks and bonds, which has supported the dollar against other currencies.

Still, traders in India are now anticipating a period of relative consolidation as they await steps from a government whose measures so far, including steps to curb gold imports, have failed to impact markets much.

The RBI is also expected to intervene heavily should the rupee weakens towards the record low of 68.85 touched on August 28. Despite Thursday's gains, the currency has still tumbled nearly 17 per cent so far this year.



(With inputs from Reuters)