* Rupee at highest since Aug 2015, rallies for 2nd day
* RBI held rates on Thurs, warned about inflation
* Bonds, shares fall; geopolitical concerns weigh
By Tanvi Mehta
April 7 The Indian rupee hit a more than 1-1/2
year high on Friday after the central bank held its policy rate
and expressed concerns about inflation, raising expectations it
would no longer cut rates this year, while bonds fell and shares
The Reserve Bank of India held the repo rate at
6.25 percent on Thursday, as widely expected, and raised its
inflation forecasts, increasing expectations it could even
tighten should prices accelerate.
Before the meeting, 21 of 34 economists had predicted stable
prices would allow the RBI to cut rates this year.
The rupee strengthened to as much as 64.32 per dollar, its
highest since August 2015, after also rallying on Thursday. It
was last trading at 64.4025/4075 compared with Thursday's close
Bonds extended falls, with sentiment also hit after the RBI
said it would start curbing excess liquidity after the
government's move to withdraw higher-value bank notes from
circulation led to a surge in bank deposits.
The benchmark 10-year bond yield rose 5 basis
points to 6.82 percent after rising 12 basis points on Thursday.
"We do not expect any more rate cuts given (that) the
journey to 4 percent inflation remains challenging. Yet we
believe that weaker than expected growth will not allow the RBI
to start increasing the policy repo rate over 2017," HSBC said
in a note to clients.
Shares edged lower, tracking Asian stock markets as
geopolitical concerns grew after the United States launched
cruise missiles against an air base in Syria.
The broader NSE index was down 0.21 percent at
9,242.20 as of 0643 GMT.
The benchmark BSE index was 0.21 percent lower at
Both indexes have gained around 0.8 percent on week, and are
heading for a second consecutive weekly gain.
Telecom stocks Bharti Airtel and Idea Cellular
rose as much as 2.53 and 3.35 percent respectively
after rival Reliance Jio Infocomm, a unit of Reliance Industries
, said the telecom regulator had asked it to withdraw a
3-month complementary offer to subscribers.
The Nifty Realty index rose as much as 1.14
percent to its highest in nearly two years.
India's central bank on Thursday said it has allowed banks
to invest in real estate investment trusts (REITs) and
infrastructure investment units (InvITs) within regulations
prescribed by the capital markets regulator.
Sun Pharmaceutical Industries Ltd fell as much as 3
percent to its lowest since Feb 22 after the U.S. drug regulator
found storage and logistics lapses during a surprise visit to
Dadra facility, the Economic Times reported.
(Reporting by Tanvi Mehta in Bengaluru; Editing by Biju