Indian shares fell to their lowest close in 2-1/2 weeks as software stocks slumped on caution ahead of India's top IT services provider Tata Consultancy Services' earnings report later in the day.
Overseas investors, the primary drivers behind the stock market gains, sold cash shares worth 216.3 million rupees ($3.59 million) and equity derivatives worth 12.18 billion rupees on Tuesday - their second straight session of selling.
Investors in India are looking forward to the conclusion of the elections in mid-May. An opinion poll this week forecast that the BJP and its allies would scrape a majority in the 543-seat lower house of parliament. For election related coverage, see
"There is position squaring happening in stock markets ahead of the election outcome and we will see position adjustments in the rupee too. The election result is the key factor for all markets now," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.
The partially convertible rupee closed at 60.37/38 per dollar compared with 60.23/24 on Tuesday. The unit moved in a range of 60.20 to 60.43 during the session.
Traders said gains in other Asian currencies after strong China growth numbers, however, limited the fall in the rupee.
The South Korean won led a rebound among emerging Asian currencies on Wednesday after better-than-expected Chinese first-quarter growth data eased concerns over a sharp slowdown in the world's second-largest economy.
In the offshore non-deliverable forwards, the one-month contract was at 60.75 while the three-month was at 61.53.