Indian Rupee Falls on Concern Global Funds to Reduce Investment

India's rupee fell for a second day on concern that declining local stocks will prompt global funds to slow investment in the country.
The currency dropped to the lowest in two weeks as India's benchmark share index extended yesterday's biggest loss in four months. Signs that credit-market losses tied to U.S. subprime mortgages will slow global economic growth prompted investors to sell higher-yielding assets.
``Sentiment on the rupee is a bit weak,'' said Vikas Babu, a currency trader at state-owned Andhra Bank Ltd. in Mumbai. ``The weakness across Asian stock markets has raised concerns about possible capital outflows.''
The rupee weakened 0.1 percent to 39.565 per dollar as of 10:40 a.m. in Mumbai, according to data compiled by Bloomberg. The currency dropped 0.5 percent yesterday, the biggest decline in two months. It may fall as low as 39.7 today, Babu said.
The Bombay Stock Exchange's Sensitive Index fell for a fourth day after dropping 3.8 percent yesterday, its largest decline since Aug. 16. The MSCI Asia Pacific Index of regional shares lost 0.3 percent.
The rupee's 11.9 percent gain this year, the second-biggest among Asian currencies after the Philippine peso, was fueled by record purchases of stocks and bonds by global investors. Overseas investors more than doubled Indian equity purchases to an all-time high of $17.2 billion this year and debt investments reached $2.02 billion, the highest ever.