The Indian rupee dropped on Monday after the government's interim budget for the next fiscal year failed to deliver major steps to boost a faltering economy and helped shares tumble 3.4 percent. Gains in the dollar against major units overseas also prompted banks to buy the U.S. unit. The partially convertible rupee closed at 48.84/85 per dollar, 0.4 percent weaker than 48.67/68 at close on Friday. "There was nothing positive for the rupee in the budget and since the stock market reacted negatively, that is likely the reason for fall in rupee," said V. Kumar, chief dealer with State Bank of Travancore. "The pressure is on the downside for rupee," he said, adding the local unit could drop towards 52 per dollar levels. Shares .BSESN fell 3.4 percent, the biggest drop in two weeks, after finance minister Pranab Mukherjee delivered a budget containing little in the way of new stimulus for an economy expected to slow to a six-year low this fiscal. [.BO]. Foreign fund outflows from stocks were a key factor for the rupee's fall in 2008. Foreigners have already withdrawn about $967 million from Indian shares this year, after selling more than $13 billion last year. In the budget the government projected spending may have to jump later this year to shield the economy from the global slump and stem job losses, fueling fears of a spiralling fiscal deficit that is headed for a seven-year high. [ID:nISL428472]. Dealers were also watching the dollar's performance overseas for cues. The dollar index <=USD>, a gauge of the U.S. unit's performance against majors, was up 0.2 percent, hurting rupee sentiment. The dollar hit a two-month high on a trade-weighed basis on Monday as global recession fears encouraged buying of safer assets, while the yen rose versus the euro as a G7 meeting omitted mention of the currency's strength.

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