RTRS: Indian rupee nears record low as stocks fall
* Rupee near record low, fund flows watched
* Central bank expected to step up dollar sales to help rupee
* Traders say rupee may touch 51 per dollar in next week (Updates to early trade)
MUMBAI, Dec 2 (Reuters) - The Indian rupee fell to near its record low on Tuesday as sharp losses in the stock market raised fears foreign investors would withdraw more funds, but suspected central bank intervention helped arrest the early fall.
At 10:50 a.m. (0520 GMT), the partially convertible rupee was at 50.52/53 per dollar, off an early low of 50.55 but still 0.4 percent weaker than its Monday's close of 50.30/32.
The rupee had hit a record low of 50.60 on Nov. 20, at which point it was more than 22 percent down on the year.
"The inflows into the system are peanuts compared to the foreign institutional investor outflows, besides, the speculation about allowing the yuan to depreciate is also a factor weighing on the rupee ," said V. Kumar, chief dealer with State Bank of Travancore.
"The rupee may touch 50.80 today provided the central bank is not very aggressive, and 51 may be in a week's time."
There was speculation that China might be changing its foreign exchange policy to permit yuan depreciation, as a means to stimulate its slowing economy. For related stories see [CNY/].
Indian shares .BSESN were about 3 percent lower after global stock markets plunged on a further deterioration of the outlook for the world economy. See [.BO].
Foreign fund outflows have been a key factor for the rupee's decline this year. Foreigners have sold a net $13.7 billion worth of Indian shares after buying a record $17.4 billion last year.
However, there have been net inflows of $2.8 billion into the debt market in 2008.
Dealers said the central bank was seen selling dollars in early deals around 50.50 rupees to halt the sharp fall, and they expect them to keep stepping in to support the currency.
One-month offshore non-deliverable forward contracts PNDF were quoting at 51.35/50, weaker than the onshore spot rate, indicating a bearish near-term outlook. (Reporting by Swati Bhat; Editing by John Mair)
