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MUMBAI: The rupee posted its biggest daily gain in three years on Friday after the government confirmed it will not impose retroactive taxes on foreign investors and as global risk asset rallied. Euro zone leaders agreed on Friday to take emergency action to bring down Italy's and Spain's spiralling borrowing costs and to create a single supervisory body for eurozone banks by the end of this year, a first step towards a European banking union.
The improved global risk environment comes as investors are growing more hopeful of meaningful policy reforms at home after Prime Minister Manmohan Singh, a former central bank governor, took charge of the finance ministry.
The government released draft rules on Thursday and said the general anti avoidance rules, or GAAR, would not apply retroactively, a big concern for portfolio investors.
"The INR may outperform as well as India seems to be backtracking on its plans to retroactively apply new tax rules that would penalize a major foreign direct investor," said Dariusz Kowalczyk, senior economist & strategist for Asia ex-Japan at Credit Agricole.
The rupee settled at 55.6050/6150 as per State Bank of India data, rising 3.1 per cent over its previous close. It rose 2.7 per cent on the week, its biggest weekly gain in over two and half years.
That marked a turnaround after the rupee tumbled to a record low of 57.32 against the dollar a week ago.
"I will wait for more clarity on the euro measures. The dollar/rupee broke a very important support at 56. If it sustains below that, we can see a further fall," said Abhishek Goenka, chief executive at India Forex Advisors.
India has been buffeted by various macroeconomic concerns, primarily the twin fiscal and current account deficits, leaving it vulnerable to capital outflows at a time of global risk aversion.
However, with Singh, widely credit with ushering in economic reforms in India in the 1990s, taking charge of the finance portfolio, investors are hoping he will push some much awaited reforms and address concerns on tax issues.
Global risk aversion has also improved. The euro surged following relief after the statement from European leaders, raising hopes it could help ease a big recent overhang in global markets.
One-month offshore non-deliverable forward contracts were quoted at 56.02.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX all ended at 56.0550. The total volume was at $4.9 billion.
Sensex jumps 439 points
The BSE sensex rose 2.6 per cent on Friday fuelled by a global rally in risk assets after European leaders agreed on decisive action to lower the borrowing costs of Italy and Spain and create a single supervisory body for euro banks. After all-night talks, the leaders of the 17-nation currency bloc agreed that the euro-area rescue funds could be used for sovereign debt purchases without forcing countries to adopt extra austerity measures.
Local stocks received a further boost on Morgan Stanley upgrading Indian equities and a strong rebound in the rupee aided sentiment.
The upgrade came at a time when Prime Minister Manmohan Singh took charge of finance ministry on Tuesday and said will take steps to revive economic growth.
On Thursday, India published draft guidelines to implement rules that target tax evasion but have provoked an outcry among foreign investors at a time when the country needs capital inflows.
"Positive global cues emerging from EU and positive news flow pertaining to what progressive measures PMO can take, now that finance ministry has come under its ambit, took the markets higher," Sandeep Shah, CEO, Sampriti Capital said.
"Nifty should head 5,400-5,600 in coming months," he said.
BSE sensex gained 2.59 per cent at 17429.98, highest level since May 2.
The BSE index surged 9.2 per cent in June, its biggest monthly gains since January
The Nifty also added 2.52 per cent to be at 5,278.90 points adding 9.6 per cent this month.
Banks, infrastructure shares were leading the gains while some auto shares gained after announcement of reduction in petrol prices by 2.46 rupees per litre.
ICICI Bank rose 5 per cent, State Bank of India rose 2.9 per cent while HDFC Bank added 2.7 per cent.
Bharat Heavy Electrical rose 5.16 per cent while Larsen & Toubro added 4.1 per cent, the company also secures orders valued over 20.40 billion rupees.
Bajaj Auto advanced 1.5 per cent while Hero Motocorp ended 3 per cent higher.
Maruti Suzuki India rose 4.4 per cent after Jefferies upgraded it to "buy" from "hold" and raised target price to 1,446 rupees from 1,398 rupees.
Broad-based buying helped gains in other blue chip shares: Reliance Industries ended 2.5 per cent higher and cigarette major ITC added 3 per cent.
source
MMS to the rescue again ?
The improved global risk environment comes as investors are growing more hopeful of meaningful policy reforms at home after Prime Minister Manmohan Singh, a former central bank governor, took charge of the finance ministry.
The government released draft rules on Thursday and said the general anti avoidance rules, or GAAR, would not apply retroactively, a big concern for portfolio investors.
"The INR may outperform as well as India seems to be backtracking on its plans to retroactively apply new tax rules that would penalize a major foreign direct investor," said Dariusz Kowalczyk, senior economist & strategist for Asia ex-Japan at Credit Agricole.
The rupee settled at 55.6050/6150 as per State Bank of India data, rising 3.1 per cent over its previous close. It rose 2.7 per cent on the week, its biggest weekly gain in over two and half years.
That marked a turnaround after the rupee tumbled to a record low of 57.32 against the dollar a week ago.
"I will wait for more clarity on the euro measures. The dollar/rupee broke a very important support at 56. If it sustains below that, we can see a further fall," said Abhishek Goenka, chief executive at India Forex Advisors.
India has been buffeted by various macroeconomic concerns, primarily the twin fiscal and current account deficits, leaving it vulnerable to capital outflows at a time of global risk aversion.
However, with Singh, widely credit with ushering in economic reforms in India in the 1990s, taking charge of the finance portfolio, investors are hoping he will push some much awaited reforms and address concerns on tax issues.
Global risk aversion has also improved. The euro surged following relief after the statement from European leaders, raising hopes it could help ease a big recent overhang in global markets.
One-month offshore non-deliverable forward contracts were quoted at 56.02.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange, the United Stock Exchange and the MCX-SX all ended at 56.0550. The total volume was at $4.9 billion.
Sensex jumps 439 points
The BSE sensex rose 2.6 per cent on Friday fuelled by a global rally in risk assets after European leaders agreed on decisive action to lower the borrowing costs of Italy and Spain and create a single supervisory body for euro banks. After all-night talks, the leaders of the 17-nation currency bloc agreed that the euro-area rescue funds could be used for sovereign debt purchases without forcing countries to adopt extra austerity measures.
Local stocks received a further boost on Morgan Stanley upgrading Indian equities and a strong rebound in the rupee aided sentiment.
The upgrade came at a time when Prime Minister Manmohan Singh took charge of finance ministry on Tuesday and said will take steps to revive economic growth.
On Thursday, India published draft guidelines to implement rules that target tax evasion but have provoked an outcry among foreign investors at a time when the country needs capital inflows.
"Positive global cues emerging from EU and positive news flow pertaining to what progressive measures PMO can take, now that finance ministry has come under its ambit, took the markets higher," Sandeep Shah, CEO, Sampriti Capital said.
"Nifty should head 5,400-5,600 in coming months," he said.
BSE sensex gained 2.59 per cent at 17429.98, highest level since May 2.
The BSE index surged 9.2 per cent in June, its biggest monthly gains since January
The Nifty also added 2.52 per cent to be at 5,278.90 points adding 9.6 per cent this month.
Banks, infrastructure shares were leading the gains while some auto shares gained after announcement of reduction in petrol prices by 2.46 rupees per litre.
ICICI Bank rose 5 per cent, State Bank of India rose 2.9 per cent while HDFC Bank added 2.7 per cent.
Bharat Heavy Electrical rose 5.16 per cent while Larsen & Toubro added 4.1 per cent, the company also secures orders valued over 20.40 billion rupees.
Bajaj Auto advanced 1.5 per cent while Hero Motocorp ended 3 per cent higher.
Maruti Suzuki India rose 4.4 per cent after Jefferies upgraded it to "buy" from "hold" and raised target price to 1,446 rupees from 1,398 rupees.
Broad-based buying helped gains in other blue chip shares: Reliance Industries ended 2.5 per cent higher and cigarette major ITC added 3 per cent.
source
MMS to the rescue again ?
