India's rupee eased on Tuesday as banks sought to buy the dollar to arbitrage it in the offshore market, but gains in local stocks prevented a sharp fall. The partially convertible rupee closed at 48.47/49 per dollar, slightly weaker from Monday's close of 48.41/44.
"There was not much happening today as these are year-end markets. They are likely to return to near-normal ... by the second week of January," said a dealer with a private bank. Dealers said there was some dollar demand from banks looking to arbitrage between the offshore and onshore markets.
One-month offshore non-deliverable forward contracts were at 48.78/93 per dollar. Banks buy dollars locally and sell offshore to cash in on the price differential. Foreign funds have sold a net $13.4 billion worth of Indian equity in 2008, a key factor for the rupee's more than 19 percent fall. They had bought a record $17.4 billion last year. Demand for the dollar from oil refiners and importers also weighed on the rupee. India imports 70 percent of its oil.