Overseas funds bought $99 million more Indian stocks than they sold on June 9, compared with average daily inflows of $202 million last week, the latest exchange data show. The new government is likely to release its first budget in the second week of July.
The rupee traded at 59.3125 per dollar as of 10:28 a.m. in Mumbai, compared with 59.2975 on Tuesday, according to prices from local banks. The currency touched 59.3600 earlier, the weakest level since June 4.
Investors dont seem to be purchasing stocks in significant quantities, said Kishore Narne, Mumbai-based head of commodities and currencies at Motilal Oswal Commodity Broker. They will probably wait to see the budget.
One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 7.09%, say data.
Three-month offshore non-deliverable forwards on the rupee fell 0.2 percent to 60.10 per dollar, say data. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the US currency.
Traders will now focus on retail inflation data, due to be released after market hours on Thursday, for direction. However, a large impact is unlikely on Friday unless the data is significantly off market expectations.
A survey of economists found consumer price inflation probably eased to 8.4% in May, from April's three-month high of 8.59% as food prices fell slightly.
Industrial output data due around the same time is expected to show output expanded 1.9% annually in April after falling 0.5% in March.
"Market has remained very dull. The CPI and factory data will be key data points to watch out for as market expects better numbers for both," said Pramod Patil, head of foreign exchange and debt trading at United Overseas Bank.
"However, I expect the rupee to continue to trade in a 59.00 to 59.50 range for the rest of the week," he added.
The partially convertible rupee closed at 59.27/28 per dollar, little changed from 59.29/30 on Tuesday.