The rupee snapped a two-day fall on Tuesday, bouncing off a 13-month low hit earlier, supported by capital inflows into local stocks and dollar sales by state-run banks, probably on behalf of the central bank, dealers said.
The rupee had touched 46.06 per dollar in early trade, a level not seen since September 2004, but dealers said the central bank - which normally operates through state-run banks - had stepped in and bought rupees, helping the currency recover.
The partly convertible rupee ended at 45.78/79 per dollar. It gained 0.28 percent from Monday's 45.91/92, which was its weakest close since 46.00/46.01 on September 29, 2004. The 30-share benchmark BSE index closed 1.35 percent higher at 8,317.8 points, its highest close since October 13.
Foreign funds have bought stocks worth more than $200 million in the three trading sessions this month, taking their net investment in Indian stocks to nearly $7.9 billion since January. Foreign fund inflows have cushioned the rupee against costlier oil, which has caused the trade deficit to widen, and the dollar's broad rebound against major currencies.
These funds sold shares of more than $800 million in October, leading to a sharp fall in the BSE index and weighing on the rupee, which has lost 4 percent since the start of October and 5.3 percent in 2005.