Mumbai, July 23 () : RBI steps to tighten gold imports made rupee and bonds recover on the morning trade today. The Finance Ministry yesterday made it clear it was mulling options to float a sovereign bond. The investment debt quota auctioned was fully subscribed by FII.
The rupee was at 59.57 and bonds which were hit show a 5 point basis drop. After Japanese yen it was the rupee that dropped 7%.
Reports were that Fin Min is depending on the NRI inflow to bail out the rupee and issuing an NRI bond was not considered. Yesterday statement that it would be done at the right time has sent stocks in the BSE benchmark Sensex to 20,323.46 points, an increase of 8% in early trade.
Lat time,the Indian government in 2001 had used NRI bond issue to stop rupee falling and previously in 1991 and 1998. In today’s situation market expects $20 billion dollars from NRI bonds.
In 2001 it was named India Millennium bonds and raised $5.5 billion; in 1998 it raised $4.8 billion as resurgent Indian bond and in 1991 it raised $1.6 billion as India Development bond.
From April this year, the rupee has lost 12% against the dollar. RBI and Sebi had to take unconventional measures to stop the fall. Yesterday it lost 37 paise due to demand by oil companies and banks of dollars coupled with FII outflows.
Current Account Deficit (CAD) is at 4.7% of GDP and stands at $88 billion. The outflow of dollars for imports is more than the inflow through exports. Contrary to market expectations, India managed to sell its entire debt investment quotas at an auction to foreign investors.
India had put up Rs 23,661 crore at the auction but it attracted Rs.25,905 crore worth of orders for these investment debt quotas. With FII pulling away from equities as the dollar got stronger, the investment debt quota was expected to be undersold.
RBI review meeting on July 30 is expected to take more steps to boost the rupee.