The currency closed at the lowest level in more than 17 months after data from the nation's stock market regulator showed funds based abroad sold more Indian shares than they bought for a fourth month through August. They sold a net $7.2 billion of equities this year, more than a third of the record $17.2 billion they invested in 2007.
The rupee fell 0.5 percent to 44.16 against the dollar at the 5 p.m. close in Mumbai, the lowest since March 15, 2007, according to data compiled by Bloomberg. It may decline to 44.5 in a few weeks, Bhatt said.
The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, dropped 0.5 percent today, extending this year's losses to 28.5 percent.
The rupee pared losses on speculation the central bank will curb its decline to cool inflation that accelerated near the fastest pace in 16 years.
The government on Aug. 28 said wholesale prices climbed 12.4 percent in the week ended Aug. 16 from a year earlier, after increasing 12.63 percent in the previous week, which was the biggest gain since June 1992.
Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.
India's merchandise exports, which account for about 15 percent of the economy, rose 31.2 percent in July from a year earlier, the fastest pace in three months, a government report showed today.
Imports rose 48.1 percent, widening the trade deficit to a record $10.8 billion, the government said.