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How HDFC Mutual Fund benefits Rupee

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MUMBAI: The initial public offering (IPO) of the HDFC Mutual Fund has added sheen to an unlikely beneficiary – the Indian rupee.

Traders in the local unit, battered by recent falls, are looking at some appreciation as about a billion dollars of foreign cash would come in, bidding for shares in the mutual fund arm at Indias most valuable mortgage and commercial lending group.

Net inflows, adjusted for hedging, would be in the range of $300-500 million, according an internal estimate by a large UK-based foreign bank.

"IPO related inflows have helped check the rupee's slide for now," said Keta Kurkute, senior vice president, United Financial Consultants. "Normally, overseas investors bring in higher quantum as they are not sure of the actual allotment. The rupee's performance looks better than other EM currencies in the last two days."

HDFC Asset Management Company has raised Rs 732 crore from anchor investors including Abhu Dhabi Investment Authority, Blackrock, HSBC Global, and University of California in the IPO that opened for subscription on Wednesday.

On the first day, the institutional portion through which overseas investors bid received 1.19 times the subscription for Rs 578 crore. The sale will close for subscription on Friday.

The rupee gained 0.23% against the dollar to close at 68.79 Wednesday. The local unit has been the worst performing currency in Asia this year, extending its losses to over 7.5%. But it has pared its losses a bit in the past two days, leaving behind peers like Japanese yen, Philippine peso, and Singapore and Hong Kong dollars.

“There have been some foreign fund inflows that have helped the local unit gain on Wednesday,” said Manish Wadhawan, Head of Fixed Income, Global Markets, HSBC India. “Quality IPOs should draw more foreign money, which will support the local currency. Also, emerging market currencies including yuan are showing signs of stability while the dollar strengthening has taken a breather.”

Likely central bank intervention has kept the dollar-rupee pair range bound. It may trade in the range of 68.50 and 69.00 in the next two weeks, dealers said.

Besides, a large telecom company was seen selling dollars as it received some overseas funding.

Last week, US President Donald Trump sparked off speculations over dollar weakness as he highlighted the disadvantages of a strong dollar for the US, which is seeking to re-balance its trade ties with China, the Asian Far-East, and Europes richer neighbourhoods.

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