Shares fell for a fifth day as dealers booked profits in a market which has outperformed its regional peers in 2012 and seen capital inflows of over $20 billion.
The rupee has been supported in recent sessions by inflows on shares sales by miner NMDC and Bharti Infratel. About 30% of NMDC's $1.1 billion share sale was picked up by foreign investors, sources said.
Bharti's up to $830 million initial public offering was fully covered by Thursday, a day ahead of issue close. The rupee's losses were also caused by a rebound in the global dollar on Thursday as investors looked past an expected Fed outcome and booked profits on short dollar positions.
The recovery in the global dollar and a fall in stocks just turned the tide against the rupee, said Hemal Doshi, currency strategist, Geojit Comtrade.
Unless the $/INR closes below 54.25, it will stay in a 54.25-54.80 range. The rupee closed at 54.46/47 per dollar, weaker than its Wednesday's close of 54.32/33. Investors are now looking forward to the inflation data on Friday, with a Reuters poll showing a 7.60% rise in October.
In the offshore non-deliverable forwards, the one-month contract was at 54.78, while the three-month was at 55.31.
Bond yields down on OMO hopes
The government bond yields ended lower as the market expected the central bank to launch another round of open-market operation soon, to bridge a likely huge cash deficit after the advance tax outgo this week.
The banking system's liquidity continued to show signs of strain on Thursday, as borrowings from the central bank's repo window crossed the comfort level of deficit, rising to R81,155 crore.
The benchmark bond yield fell 2 bps to end at 8.16%.