AFX: India Rupee Falls In Thin Trade Amid Terror Attacks; Bonds Up
MUMBAI (Dow Jones)--A broad demand for the U.S. dollar led by oil refining companies pushed the Indian rupee down Friday, adding to the jitters after a terrorist siege in the country's financial heartland.
The greenback rose to INR50.09, as compared with INR49.49 Wednesday. The trade volume was thin amid growing safety concerns as the battle between security personnel and terrorists stretched on for the second day.
"There is general worry in the market as the standoff is still continuing. The dollar may post more gains if the situation remains so fluid," said a dealer with state-run bank.
India's financial markets were closed Thursday to take stock of the violence after a group of terrorists struck the financial district of Mumbai late Wednesday, leaving as many as 119 dead.
Most of the banks and financial companies, which have their headquarters in the area, were operating on skeletal staff Friday even as rescue operations for several hostages trapped in two luxury hotels and a residential building continued through the day.
The Indian unit, which has been under pressure lately from a steady withdrawal of capital by foreign investors and a widening fiscal deficit, was hurt despite a resilient performance by the local shares.
The Bombay Stock Exchange's benchmark Sensex index ended 0.7% higher at 9092.72 points after recovering from a 1.5% fall earlier in the day.
In the government debt market, bonds notched gains as speculation on an interest rate cut by the central bank grew.
The benchmark 8.24% 2018 bond closed at INR107.90, up from INR107.75 on Wednesday. Its yield fell by two basis points.
"There are now strong expectations in the market that the rate cuts may come very soon, may be today itself," said a bond dealer at state-run bank, adding that the market is expecting the Reserve Bank of India may act Friday.
The economy grew by 7.6% in the second quarter of the fiscal year, according to the gross domestic product data released Friday.
The bonds prices dipped in an immediate response to the data, which was slightly higher than the expected 7.3% according to a Dow Jones Newswires poll of 15 economists.
However, prices bounced back soon as markets assimilated the growth data, which showed the slowest economic expansion in almost four years.
-By Harsh Joshi; Dow Jones Newswires; 91 22 22884212; harsh.joshi@dowjones.com
