Indian shares scaled new three-month peaks on Wednesday as investors shrugged off concerns about a delayed and weak start to the annual monsoon rains and bought technology stocks. But the rupee slid near to Monday's 1-1/2 week closing low, undermined by growing concern over a steadily widening trade deficit and wariness over the euro's weakness against the dollar.
Bombay's benchmark index rose 0.68 percent to close above the psychologically crucial 6,900 points mark and dealers said the index looked set to test its March 9 all-time high of 6954.86 in the coming days.
Rainfall in India's June-September monsoon, vital for crops ranging from rice to oilseeds in the country's poorly irrigated farms, was 51 percent lower than normal in the first week of June, raising fears of slower economic growth.
Farms contribute more than a fifth of output in the $600 billion economy but more importantly also drive a significant share of consumption in the countryside, where two-thirds of India's 1.1 billion people live.
The Centre for Monitoring Indian Economy, a leading think tank, this week cut its forecast for growth to March 2006 to 6.0 percent from 6.6 percent on fears of a weak monsoon. The Indian central bank has forecast GDP growth of 7 percent this year.
Software services exporters led the rally on Wednesday on expectations of better earnings as the rupee slid against the dollar. India's number two exporter and index heavyweight Infosys Technologies Ltd, rose 1.1 percent while fourth-ranked Satyam Computers Ltd added 1.6 percent.
A Reuters poll released on Wednesday showed a majority of 13 respondents expected the short-term reverse repo rate to remain steady at 5 percent.
The yield on the popular 12-year benchmark bond eased to 6.9980 percent from 7.0165 percent on Tuesday.