India’s rupee advanced to a six-week high as local stocks extended gains on optimism the government’s stimulus spending will support economic growth. The currency strengthened past 50 per dollar for a second time this week as foreign investors’ purchases of Indian shares this month already exceeded the total for March. The benchmark Bombay Stock Exchange Sensitive Index has rallied 34 percent since reaching a four-month low on March 6 and today touched the highest level since October. “Risk aversion is receding and investors are looking more positively on fundamentals,” said Sanjay Arya, Mumbai-based treasurer at state-owned Bank of Maharashtra. “I am optimistic on the rupee. It’s going to show a sustained rise.” The rupee rose as much as 0.7 percent to 49.85 a dollar, the highest intraday level since Feb. 25, before closing 0.3 percent stronger from yesterday at 50.04 at 5 p.m. in Mumbai, according to data compiled by Bloomberg. It may gain to 49.75 in a week, Arya said. Offshore contracts indicate traders still expect the rupee to weaken 0.5 percent from the spot rate to 50.25 in a month, compared with bets for a rate of 50.42 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. Overseas funds bought $273.5 million of stocks more than they sold this month through April 6 after net purchases of $131.6 million in March, according to data provided by the Securities and Exchange Board of India. Falling Production The rupee pared gains after a government report showed industrial production fell the most in more than 14 years and inflation slowed to the weakest in at least two decades. Output at factories, utilities and mines declined 1.2 percent in February from a year earlier after a revised 0.4 percent gain in January, the statistics agency said in New Delhi today. The benchmark wholesale-price index rose 0.26 percent in the week to March 28, according to a separate report. Gokaldas Exports Ltd., India’s biggest garment exporter, says the rupee’s slide to a record low helped to win orders from rivals in China, where the yuan gained against the dollar in the past year. “The yuan’s stability and the rupee’s drop is an advantage for every local exporter to get more business,” Rajendra Hinduja, managing director of the Bangalore-based company, said in an interview. “We are now competing and winning.” Exporters Gain Gokaldas, which makes Gap sweatshirts and Nike tracksuits, and Sarju International Ltd., a producer of Reebok sportswear, say they are becoming more competitive after India’s currency fell 20 percent in the past year, while the yuan rose 2.4 percent. The rupee was the worst performer after the South Korean won among Asia’s 10 most-active currencies in the past 12 months. The rupee will drop to 53 per dollar this year, according to the median estimate of seven exporters surveyed by Bloomberg last week. The Reserve Bank of India may favor a weaker currency to bolster Asia’s third-biggest economy, said Richard Yetsenga, a Hong Kong-based strategist at HSBC Holdings Plc, who forecasts a steeper rupee decline to 54. “The central bank won’t mind an orderly movement in the currency, even if it means a weaker rupee,” Yetsenga said. “They will allow exporters to take that advantage.”

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