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Markets reclaim lost ground, rupee clawing back

MUMBAI: The stock market rose for the second straight day on Friday, taking cues from the rebound in the rupee amid expectations that the government will soon announce measures to stem the slide in rupee and stocks.

The Sensex closed above 38,000 and the Nifty edged past 11,500 on Friday, erasing most of the week’s losses that emanated from worries about the impact of a weaker rupee on the economy. The Sensex rose 372.68 points or 0.99 per cent to close at 38,090.64 while the Nifty climbed 145.30 points or 1.28 per cent to end at 11,515.20. Vedanta, PowerGrid, Asian Paints and NTPC gained 3-6 per cent. Foreign portfolio investors bought shares worth ?1,090.56 crore, reversing their recent selling spree.

The rupee gained 0.45 per cent to close at 71.86 after recovering from a record low of 72.92 on Wednesday. Financial markets were shut on Thursday. Analysts said in addition to expectations of intervention by the government and the RBI, the rupee’s bounce was also driven by the Turkey central bank’s decision to raise interest rates to 24 per cent in a bid to curb rocketing inflation and prevent a currency crisis.

“The rupee could take some respite amid a cocktail of external and internal factors,” said Anindya Banerjee at Kotak Securities. “While Turkish lira shows some signs of stabilising, the authorities back home are expected to come out with some measures that could check further slide.” The crash in Turkish lira by as much as 50 per cent against the dollar has been one of the main triggers for the sell-off in emerging market currencies and stocks including India’s.

Turkish President Recep Tayyip Erdogan has been a strong opponent of raising interest rates.

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The rupee has fallen 11.1 per cent so far this year, sparking panic in the government and the market over the pace of the slide. The country’s forex reserves slipped below $400 billion as on September 9 because of the RBI’s efforts to curb the fall in the rupee.

Some traders expect authorities to come up with a NRI-bond investment programme, which would boost the dollar reserves and prop up the rupee. Dealers are now expecting the rupee to trade in the broad range of 71-73 in next few weeks. The direction of the stock market will depend on the moves in the rupee and crude oil prices. “It will be too early to conclude that the worst is over for the markets and the rupee,” said Nilesh Shah, managing director, Kotak Mutual Fund.

“Oil, US interest rates and the politics here will play a big role in the market direction.”

MSCI’s Asia-Pacific index outside Japan rose 1.2 per cent on Friday after the US and China looked set to initiate fresh talks on trade after months of escalating dispute. Korea’s Kospi rose 1.4 per cent and Hong Kong’s Hang Seng climbed 1 per cent.

Oil rose on Friday after prices fell by the most in a month on Thursday. Brent crude was up 5 cents at $78.23 a barrel after falling 2 per cent on Thursday. The benchmark had risen to $80.13 — its highest since May 22.

Source: Economic Times