Continued dollar selling by exporters also aided the rupee's upward journey for the second session in a row even as the dollar index was trading up 0.14 per cent against a basket of six major global currencies.
Overseas funds pumped in over Rs 1,465 crore in Indian equities today, helping benchmark indices hit fresh highs.
At the Interbank Foreign Exchange (Forex) market, the rupee resumed slightly lower at 60.92 a dollar from last weekend's close of 60.89.
While it touched a low of 60.93 soon after, a strong recovery mirroring jump in Indian shares pushed the rupee to a intra-day high of 60.6450. It settled for the day at 6-1/2-month high of 60.77, a rise of 12 paise or 0.20 per cent. Last Friday, it shot up by 45 paise or 0.73 per cent.
The rupee had last closed at 60.77 on August 6, 2013.
"I certainly believe ... the economy has stabilised and that is reflected in rupee and stock markets. And going forward, I think, we will see growth numbers also improving," Economic Affairs Secretary Arvind Mayaram said in Delhi.
The Indian benchmark S&P BSE Sensex today flared up by 300.16 points, or 1.38 per cent, on hopes the RBI will hold interest rates in its upcoming policy review next month.
Pramit Brahmbhatt, CEO, Alpari Financial Services, (India) said: "Rupee appreciated today taking cues from the strong local equities which closed at record highs. The gain was capped by the dollar index which is trading positively."
On Friday, the rupee zoomed 45 paise on the back of massive capital inflows linked to the government stake sale in Axis Bank. Experts see FII inflows helping rupee firm up further.
"Going ahead, we will track the number of reports due this week from US, euro zone to get further direction," said Abhishek Goenka, Founder and CEO, India Forex Advisors.
FIIs picked up shares worth Rs 14.79 crore on Saturday in a special trading, as per provisional data with exchanges. Meanwhile, forward dollar premium continued to rule weak on persistent receipts by exporters.
The benchmark six-month premium payable in August dipped to 213-215 paise from last Friday's close of 220-222 paise.
Far forward contracts maturing in February, 2015 also fell to 454-456 paise from 464-466 paise.
The RBI fixed the reference rate for dollar at 60.7030 for the euro at 83.8070.
The rupee improved further to 100.30 against the pound from last close of 100.53. It also remained firm to end at 83.70 per euro from 84.03.
The rupee hardened to 59.33 per 100 Japanese yen from 59.53.