RTRS:Indian rupee falls as importers step up dollar buying
* Dollar inflows still strong; shares fall over 2.5 pct
* Refiners step up dollar buying as oil prices high
* Outlook on rupee still positive - traders
(Adds quotes, comments, updates to close)
MUMBAI, Feb 27 (Reuters) - The Indian rupee fell
sharply on Monday as domestic oil refiners stepped up dollar
purchases given the recent run up in world oil prices, with a
fall in local stocks adding to losses.
But a sharper slide in the rupee was likely prevented due to
continued robust capital flows into local equities and debt,
traders said.
The rupee ended at 49.2150/2250 to the
dollar, down from Friday's close of 48.935/945. It moved in a
band of 48.9400 to 49.3050 during the session.
"Equities moved deep into the red and there was dollar
buying from importers, but I think weakness in rupee is likely
to be very limited," said Naveen Raghuvanshi, associate vice
president of foreign exchange trading at Development Credit
Bank.
India imports about 80 percent of its oil requirements and
oil companies are the biggest buyers of dollars in the local
currency market.
Oil companies have increased dollar purchases in the last
few days as rising tensions between Iran and the West have
pushed oil prices higher on fears of supply disruptions. Iran is
a key supplier to India.
Brent crude slipped below $125 per barrel on profit-taking
after five days of gains pushed oil to 10-month highs on worries
tension over Iran's disputed nuclear programme could lead to a
disruption in Middle East supplies.
Indian shares dropped 2.7 percent on Monday to post their
biggest fall in five months.
Macquarie in a research note on Friday said India
should brace for an oil shock as crude oil has hit an all-time
high in rupee terms.
The research house said that high oil prices will raise
macro concerns and lead to de-rating of Indian equities. It
added that high oil prices can push up inflation again and
prematurely stall the rate-easing cycle.
DCB's Raghuvanshi expects foreign inflows will stay robust
and help the rupee strengthen and move to 48.88 to the dollar, a
strong resistance, which if broken could take the currency to
48.60, a level last seen on Feb. 6.
Foreign funds have invested more than $9 billion in Indian
equities and debt so far in 2012, according to the Securities
and Exchange Board of India, an indication of investor appetite
in Asia's third largest economy.
Apart from inflows, fears that the Reserve Bank of India
will conduct an active and strong intervention in local foreign
exchange market will help put brakes on any sharp selling
pressure on rupee.
In December, the RBI sold more than $9 billion in the spot
and forwards markets, its biggest intervention in nearly
three-and-half years, after the rupee hit a record low of 54.30.
The RBI has also taken administrative measures to curb
speculation in currency market while cautiously taking steps to
boost inflows. See factbox for details,
One-month offshore non-deliverable forward contracts
were at 49.70.
In the currency futures market, the most-traded
near-month dollar-rupee contracts on the National Stock
Exchange, the MCX-SX and the United Stock Exchange all ended
around 49.62, on a total volume of $4.36 billion.
