Rupee ends at 42.885/895 per dollar

The rupee rose on Tuesday, but lacked conviction despite a second day of solid gains in the stock market as dollar demand from private banks and oil importers weighed.

The partially convertible rupee ended at 42.885/895 per dollar, 0.13 percent stronger than its close of 42.945/955 on Monday. "The stock markets had a bit of impact, but not much. It was a mixed interest, some foreign banks were seen selling rupees since morning and private banks were seen buying dollars," said Paresh Nayar, chief dealer at Development Credit Bank.

"Overall, it appears that at 42.95 there is the fear of central bank intervention, and the dollar-rupee is seen having support at the 42.75 level on the downside," he added. Traders said the central bank had sold dollars last month to support the rupee when it fell to a 13-month low of 43.21, and appeared to want to keep it stronger than 43 per dollar.

Indian shares rose nearly 2 percent on Tuesday, led by gains in banking and financial stocks, taking their gains this week to 3.3 percent.

Foreign fund outflows in recent months have been weakening support for the rupee. Foreigners have sold a net $5.8 billion worth of Indian stocks so far in 2008, helping push the rupee down more than 8 percent. They had bought a record net $17.4 billion of stocks last year, when the rupee rose more than 12 percent.

Oil, India's biggest import, hit a record high near $140 a barrel on Monday. India imports nearly 70 percent of its oil needs and rising oil prices are seen widening the trade account deficit, which could weaken the rupee.