Rupee, stocks stage recovery

Forex dealers said that dollar remittances from some large corporates saw the rupee firming up against the dollar. The Indian unit had breached the 43 mark on Tuesday to touch a new low of 43.05 against the dollar following Finance Minister Yashwant Sinha’s statement on Monday that the rupeewould not be defended. On Tuesday, he however made a statement that excessive volatility will not be tolerated and hinted at a possible defence of the rupee.

The rupee opened at 42.80/85 and stronger than the previous close of 42.90/92 as banks with long dollar positions began to unwind their positions. This saw the rupee strenghtening against the dollar and another fresh round of selling by exporters during the day saw the rupee gain to close at 42.68/70 — the highest close of the week.

“There has been some import cancellation today,” said a dealer in a foreign bank, adding that today’s rally of the rupee was temporary and a large demand for the dollar is likely to drive the rupee down. The forward rupee strengthened on Wednesday as State Bank of India entered the market to receive dollars. This saw exporters too coming in which saw forward premia falling across the board. The six-month forward fell to close at 11.55 per cent as compared to the previous close of 12.25 per cent.

On the stock marketfront, fresh valuations of Indian stocks in the wake of the stabilising rupee coupled with signals from Sebi about a review of the current market scenario saw the Sensex register a net recovery of 3.49 per cent. Sensex had fallen by over 260 points in a week. While a section of market participants attributed the recovery to the attractive valuations on account of the 16.6 per cent fall in the index since the budget, technical analysts highlighted the crucial support at the 2,951 levels from which the index has bounced back four times in the past couple of sessions.

“All that could go wrong with the markets has already occurred. Now, the downslide will come from two factors: one, if the political uncertainty comes into fray, the index will touch the 2,500 level which will be worst for investors. Second, if the currency crises further deepens like the Asian countries there will be a huge outflow of foreign capital further bruising the markets,” said K N Atmaramani, managing director, Tata Assest Management.“Since the bad news has already been discounted by the markets and the index will continue to remain steady in the band of 3,000 to 3,250 levels,” he said.

Software shares led the rally on the local bourses with fresh enquiries pouring in from both domestic and foreign institutions. Most of the software counters hit the upper end of the price band on the BSE and NSE.

PM asks FM to stem Re slide

NEW DELHI: Prime Minister A B Vajpayee on Wednesday directed finance minister Yashwant Sinha to prevent any further speculative erosion in the value of the rupee. He also discussed a slew of measures to prop up investor confidence in the economy.

Following the Prime Ministerial directive, large scale intervention by the Reserve Bank of India (RBI) in the Indian currency markets may ensue if the current slide continues, top finance ministry sources said.

The Prime Minister expressed displeasure on the state of the economy and the general sense of gloom that has come to pervade the currency andstock markets. He has called for effective and demonstrative action on the part of the finance ministry within the next few days. Concrete project specific action was emphasised. Vajpayee summoned Sinha to his 7, Race Course Road residence soon after he reached Delhi after a week-long holiday. The one-and-half hour meeting was attended by principal secretary to the Prime Minister Brijesh Mishra, finance secretary Montek Singh Ahluwalia and revenue secretary N K Singh.