Sensex, rupee gain as government sticks to fiscal deficit target

REUTERS – Indian shares rose for a second consecutive session while the rupee and bonds also gained as sentiment improved after the government stuck to its budgeted market borrowing for the year, easing concerns New Delhi would widen its fiscal deficit target.

Indian markets have been under pressure this month on foreign fund outflows amid worries that the government may widen its fiscal deficit target of 3.2 percent of gross domestic product for the year ending in March 2018 to boost an economy that grew at a slower pace than expected.

The government’s decision to stick to its planned market borrowing of 2.08 trillion rupees ($ 31.79 billion) in October-March was seen as an indication New Delhi planned to stick to its fiscal commitment, though Economic Affairs Secretary Chandra Garg did leave the door open for increased bond sales.

“(The) government’s decision to stick to its fiscal deficit target (is) helping sentiment,” said Deven Choksey, promoter, KR Choksey.

The Nifty was up 0.66 percent at 9,833.50 as of 0648 GMT, while the benchmark Sensex was trading 0.59 percent higher at 31,466.38.

Meanwhile, the rupee strengthened to as much as 65.28 per dollar, but was still down over 2 percent on month against the dollar, its biggest monthly decline since November 2016.

The benchmark 10-year bond yield fell 1 basis point to 6.63 percent, helped after the Reserve Bank of India on Thursday raised the foreign investment limit

Markets saw a tough month in August as a slew of negative global and domestic factors, including expectations of further rate hikes by the U.S. Federal Reserve and a weaker-than-expected economic growth at home, hit sentiment.

The Nifty was headed for a 1.5 percent loss in August with foreign investors net selling equities worth $ 2 billion during the month. They had sold a net $ 1.1 billion in shares in September.

Foreign outflows have weighed on the rupee, which was down 2.3 percent this month against the dollar, its biggest fall since November.

Financials gained on Friday, with shares of HDFC Bank Ltd and ICICI Bank Ltd rising 1.1 percent and 1.4 percent, respectively.

Meanwhile, India’s biggest gas transporter GAIL (India) Ltd jumped as much as 8.3 percent after a consultation paper released by India’s natural gas regulator indicated that the unified or pooled tariff for the gas company’s integrated pipeline was about 78 percent higher than existing tariff.