The benchmark indices BSE and NSE, which were open for trading on Monday, hit second consecutive record highs on Tuesday on the back of good institutional demand, both from home and abroad. The partially convertible rupee closed at 60.6750/6850 per dollar compared with 60.76/77 on Thursday. The unit moved in a tight band of 60.6550 to 60.7825 during the session.
India’s trade deficit widened to $12.23bn in July from $11.76bn in June, but had little impact given it came largely in line with market expectations. In the offshore non-deliverable forwards, the one-month contract was at 61.01 while the three-month contract was at 61.59.
The government bonds edged lower, as investors took profits after debt markets posted their best weekly gain in nearly 3-months last week, although major losses were capped as Brent crude prices hovered near 14-month lows.
The new 10-year benchmark bond yield rose by a 1bp to close at 8.53%. In the overnight indexed swap market, the benchmark 5-year swap rate closed up 1bp at 8.04%, while the one-year rate closed unchanged at 8.45%.
The U.S. dollar traded higher against most major currencies, after a fresh batch of U.S. housing indicators coupled with solid inflation reports kept expectations strong for the Federal Reserve to wind down its stimulus program.
The U.S. Commerce Department said that the number of building permits issued in July jumped 8.1% to 1.052mn units from June’s total of 973,000. A separate report showed that the U.S. consumer price index rose 0.1% last month from June and 2.0% on year, both figures meeting estimates.
The pound declined against the dollar earlier on Tuesday, after official data showed that the annual rate of inflation in the U.K. slowed in July to a two-month low of 1.6%, curbing expectations for an interest rate increase.