Rupee little changed as fund inflows offset by trade gap

New Delhi :  India's rupee was little changed as speculation of an increase in offshore capital inflows into local shares was offset by concerns about the widening trade deficit.

Overseas investors have bought a net $12.9 billion of Indian stocks so far this year, helping to push the Bombay Stock Exchange's Sensitive Index to a two-and-a-half-year-high on August 19.

India's trade deficit widened to $43.6 billion in the April through July period, compared with $31.4 billion in the same period a year earlier, government data published yesterday showed.

"We are still expecting a gradual appreciation of the Indian rupee but it's a tussle between strong inflows and the current-account deficit," said Richard Yetsenga, the Hong Kong- based global head of emerging-markets currency strategy at HSBC Holdings Plc.

Deficit widens

The rupee was little changed at 46.79 per dollar at 11:22 a.m. in Mumbai, according to data compiled by Bloomberg.

It gained the most in more than two months yesterday.

India's current-account deficit, which includes inflows from software companies and remittances by Indians living overseas, widened to a record $13 billion in the first quarter of this year.

Offshore forward contracts indicate the rupee will trade at 47.03 to the dollar in a month, little changed from 47.05 yesterday.

Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.