Rupee has biggest monthly gain since April; Sensex rises

MUMBAI: India�s rupee climbed the most in a month since April on optimism the nation�s economic growth and rallying stock market will attract increased investment from abroad.
The currency advanced for a fifth quarter as the benchmark share index rose to a record for the eighth straight day.
The rupee also gained on speculation investors will exchange the dollar for higher-yielding emerging-market currencies after the US Federal Reserve cut interest rates this month.
�We expect rupee appreciation to continue as capital inflows remain strong,� Yeo Han Sia, currency strategist at Bank of America Corp said in Singapore. �There are greater flows into regional markets after the Fed rate cut. The strong response to ICICI Bank�s dollar bond this week shows investors remain confident about Asia, particularly India.�
The rupee gained 2.5% to 39.8425 per dollar as of the 5pm close in Mumbai, according to data compiled by Bloomberg.
The currency rose as high as 39.62, the strongest since April 1998, on September 26. Its 11.2% gain this year is the second-highest among 18 Asia-Pacific currencies tracked by Bloomberg.
The rupee may rise to 39 by the end of the year, Yeo said.
ICICI Bank Ltd, India�s biggest bank by market value, received orders worth more than three times the $2bn of five-year bonds it offered to international investors this week. The bonds rose in the secondary market on Thursday, indicating increased demand, according to Merrill Lynch & Co.
The rupee�s accelerated gains prompted at least three banks to raise their forecasts for the currency this week. JPMorgan Chase & Co said yesterday the rupee will rise to 39.5 by the year-end, reversing by almost 6% an earlier call for the currency to decline. Standard Chartered this week raised its end-2007 rupee forecast to 39.50 from an earlier call for the currency to decline to 41.80. UBS AG, Europe's largest bank by assets, raised its three-month forecast, predicting the currency will rise to a decade-high 38 per dollar.
The Indian currency also gained as lower US interest rates spurred demand for higher-yielding currencies, David Mann, Hong Kong-based senior strategist at Standard Chartered, said on Tuesday.
The Sensitive Index had the biggest quarterly gain since March 2006 as overseas investors bought more shares. The benchmark yesterday rose to its eighth consecutive record, with ICICI Bank Ltd and Tata Steel Ltd contributing the most.
The Bombay Stock Exchange�s Sensex added 140.54, or 0.82%, to 17,291.10. The S&P/CNX Nifty Index on the National Stock Exchange gained 20.80, or 0.42%, to 5,021.35.
Nifty futures for September delivery gained 29.35 points to 5,038.
�It is a shift away from US assets due to the weakening dollar,� said Prasad Nalam, who helps manage assets worth the about $2.5bn as chief investment officer at Sundaram BNP Paribas Asset Management Co. �That�s driving the Asian markets and India as well.�
Overseas investors have bought a record $11.6bn in Indian shares this year as companies raised a record $8.5bn from initial public offerings.
The Federal Reserve reduced its benchmark rate last week, easing liquidity concerns and helping the Morgan Stanley Capital International Asia- Pacific Index post a fifth quarterly advance, the longest rally since 1999.
Overseas investors bought a net Rs10bn ($251mn) of Indian shares on Thursday, according to the Securities & Exchange Board of India�s website.
ICICI Bank rose 33.90 rupees, or 3.3% to 1,063.15 rupees. Tata Steel gained 7%, the biggest gain in 22 days, to 850.35.
Refinery stocks, dominated by state-run firms which can�t raise retail prices to match the crude price rise due to government controls, fell. � Bloomberg