Rupee, stocks surge on EU deal for Spain, Italy

The rupee opened relatively strong on Friday [June 29] morning and at 56.80 against a dollar at around 9am and gained further to close at 55.60/61.

Indian government’s decision to not impose general anti-avoidance taxes on foreign investors retroactively also helped the rupee surge. On Thursday, the government confirmed in its draft guidelines that General Anti-Avoidance Rules (GAAR) would not apply retroactively, a big relief for portfolio investors.

The Indian stock markets also surged on the GAAR clarity and the European leaders’ agreement on Eurozone crisis. While BSE Sensex soared 439 points or 2.6% to a two-month high before closing at 17,430, while the Nifty index gained 130 points to cross the 5,250 mark.

Rupee’s gain comes after Indian Prime Minister Manmohan Singh, also a former central bank governor, took charge of the finance ministry after former minister Pranab Mukherjee stepped down earlier this week ahead of his presidential race.

The rupee had tumbled to an all-time low of 57.32 against the dollar last week.