While the rupee fell 0.4 percent against the dollar this year, flows from stock investors turned positive in March amid slower inflation, an improved current account and budgetary discipline. Including interest, investing in rupees will earn 2.6 percent from now until December 31, according to strategists’ forecasts compiled by Bloomberg, the most in emerging Asia.
The rupee’s attractiveness can be attributed not only to India’s central bank governor Raghuram Rajan’s success in replenishing foreign-exchange reserves, taming consumer prices and the trade deficit, but also to the recent announcements in the federal budget that sparked a rally in India’s rupee, bonds and stocks. Additionally, the government’s determination to narrow the fiscal deficit to a nine-year low boosted investor sentiment.
India has eclipsed China as the world’s fastest-growing major economy with gross domestic product projected to expand 7.6 percent in the fiscal year through March.
Global funds amounted to a net $3.1 billion in Indian stocks in March, taking inflows for the year to $209 million, and propelling the benchmark S&P BSE Sensex index 10.2 percent, putting it on course for its best month in more than four years. Investing in rupees returned 3 percent, including interest, in the past four quarters, data compiled by Bloomberg show, the highest in Asia. The currency weakened 4.7 percent in the period.