The rupee strengthened 19 paise to end at 59.80 against the dollar on Tuesday on the back of reform hopes ahead of the Union Budget even as domestic equity markets fell due to profit booking.
The new Government will present its Union Budget, which is likely to lay down tough measures on Thursday to check the fiscal and current account deficit concerns.
The rupee opened a tad higher at 59.95 as compared with Monday’s close of 60.01 per dollar on capital flows into the market. After opening positive, BSE-benchmark Sensex ended sharply weaker by 518 points (2 per cent) at 25,582 points at day’s close.
The Railway budget presented on Tuesday said the government plans to spend Rs 65,450 crore ($10.95 billion) on its railways in 2014-2015. The Railway minister pointed out that total investment in railways expected through public-private partnerships would be at a total of Rs 6,005 crore by March end 2015.
The minister also said that maximum financial outlay will be made for completing ongoing projects within this year and also endorsed the previous United Progressive Alliance (UPA) government’s proposal of bringing foreign direct investment (FDI) into all areas of railways, except operations. This boosted the hopes of positive reforms for the country.
Though the rupee declined to 59.99 in the morning trades, it surged to 59.68 as dollar selling by foreign banks also supported sentiments. The rupee is likely to gain to 58 levels in the run-up to the Budget and after that on growth optimism, experts say.
Call rates, bond yields
The inter-bank call money rates, the rate at which banks borrow short-term funds from each other to tide over liquidity mismatches, ended higher at 9 per cent from the previous close of 8.75 per cent.
The benchmark 8.83 per cent Government security which matures in 2023, also closed lower at Rs 100.63 from Monday’s close of Rs 100.83, while the yield hardened to 8.72 per cent from 8.69 per cent. Bond prices and yields move in the opposite direction.