The rupee gained the most among emerging market currencies last month as India remained insulated from China’s economic woes and amid optimism capital inflows will rise after the nation relaxed curbs on foreign ownership of its debt.

Bloomberg
Mumbai

Indian stocks climbed for a second day, trimming the benchmark equity gauge’s biggest quarterly loss in four years, after the nation’s central bank cut interest rates by more than economists estimated.
Tata Steel, the country’s top producer of the alloy, surged the most in three weeks, narrowing its quarterly loss to 30%. Hindalco Industries, an aluminium company, rose for the first time in six days. Bharti Airtel, the largest mobile-services provider, jumped the most in four months. Bharat Heavy Electricals, India’s biggest power-equipment maker, surged 4.2%.
The S&P BSE Sensex jumped 1.5% to 26,154.83 at the close in Mumbai. The index slumped 5.9% this quarter, the most since the period ended December 2011. The Reserve Bank of India on Tuesday cut its benchmark interest rate by 50 basis points, twice as much as most economists surveyed by Bloomberg predicted. Governor Raghuram Rajan had left the repurchase rate unchanged in August, resisting government pressure to lower one of Asia’s highest borrowing costs as consumer prices slow.
“India remains our number one pick in global emerging- market equities currently,” Jonathan Garner, the Hong Kong-based chief Asia and emerging-market strategist at Morgan Stanley Asia, said by e-mail yesterday. “We expect further outperformance on this news.”
The Sensex trades at 15 times projected 12-month earnings, compared with a multiple of 10.6 for the MSCI Emerging Markets Index.
Foreign investors sold$103mn of local stocks on September 28, taking this quarter’s outflows to $2.44bn, amid a stock rout in China and expectations that the Federal Reserve is close to raising interest rates. The withdrawals are on course to be the largest for any quarter since 2008. That includes a withdrawal of $1.18bn during the quarter through September 29 by India-focused exchange-traded funds, according to data compiled by Bloomberg.
Meanwhile the rupee gained the most among emerging- market currencies last month as India remained insulated from China’s economic woes and amid optimism capital inflows will rise after the nation relaxed curbs on foreign ownership of its debt.
The currency climbed 1.4% from August 31 to 65.59 a dollar in Mumbai, prices from local banks compiled by Bloomberg show. That’s the best performance among 24 emerging-market exchange rates tracked by Bloomberg and the rupee’s biggest monthly advance since January. It rose 0.6% yesterday.
“The rupee is less exposed to concerns about China’s growth slowdown and currency gyrations as India has a small trade linkage with it,” said Mitul Kotecha, head of Asia-Pacific foreign exchange and rates strategy with Barclays Plc in Singapore. “Its outperformance is likely to continue, especially following the bigger-than-expected policy easing and the increase in foreign investor limits.”
RBI Governor Raghuram Rajan cut the repurchase rate to a four-year low of 6.75% from 7.25% in a move predicted by just one of 52 economists surveyed by Bloomberg. Forty two expected a 25 basis point reduction and nine saw no change.
The $30bn limit on foreign holdings of government bonds will be denominated in rupees rather than in dollars, and the cap will be raised, the central bank said.
The ceiling will be increased in phases to 5% of India’s outstanding sovereign debt by March 2018, helping lure Rs1.2tn  ($18.3bn) of additional investment. Foreigners hold 3.8% of the debt, according to government estimates.