The rupee weakened on Tuesday as choppy stocks dampened sentiment, while expectations for a split verdict at the national elections triggered uncertainty about capital inflows.
"In the short term, we may see the rupee weakening as the elections are going to throw up a fractured mandate," a dealer with a private sector company said.
The election results are due on Saturday and traders are concerned of the possibility of a loose coalition of regional parties emerging if the ruling Congress party coalition or the main opposition Bharatiya Janata Party-led group does not win a majority on their own.
"I expect a stock market correction post results and the rupee will definitely be volatile," the dealer said.
At 10:30 a.m. (0500 GMT), the partially convertible rupee was at 49.58/59 per dollar, compared with Monday's close of 49.52/53. It hit a low of 49.70 in early trade.
Indian shares were volatile as investors extended two-day profit-taking spree after the market had jumped about 50 percent from early March lows.
Foreign funds bought a net $1.5 billion of shares in April, and added another $1 billion so far in May, data showed. These inflows have helped lift the rupee 5.3 percent off its record low of 52.2 hit on March 3.
One-month offshore non-deliverable forward rupee contracts were quoting at 49.58/61 on Tuesday.
Traders said they would also be watching the industrial output data for March, which is forecast to fall for the third time in four months. The data is due at 1200 (0630 GMT).
