Indian Rupee Advances as Stock Purchases by Funds Exceed Sales

March 17 (Bloomberg) -- India's rupee climbed to the strongest this month as weekly share purchases by overseas investors exceeded sales for the first time since mid-February.

The currency gained for a third day after the benchmark equity index rallied almost 10 percent in the last three trading sessions, fueling optimism global funds will buy more local assets. The rupee also rose on bets foreign direct investment will increase as policy makers step up efforts to revive economic growth.

"The rupee has benefited because the positive trend in equities is expected to help improve fund inflows," said Ravindra Babu, a foreign-exchange trader at state-owned Andhra Bank in Mumbai. "We've seen some FDI flows too."

The rupee climbed 0.2 percent to 51.31 per dollar as of 10:33 a.m. in Mumbai, according to data compiled by Bloomberg. It rose to 51.26 earlier, the highest since Feb. 27. The currency, which has rebounded almost 2 percent from a record low of 52.1850 reached on March 3, may touch 51.25 today, Babu said.

Funds based abroad bought a net $26 million of Indian stocks last week, compared with net sales of $543 million in the previous five-day period, according to data released by the Securities and Exchange Board of India, the nation's capital markets regulator.

Offshore contracts indicate traders bet the rupee will trade at 51.51 to the dollar in a month, compared with expectations for a rate of 51.58 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net .