* Rupee posts biggest daily gain in six weeks
* RBI seen selling USD, seeks to boost inflows
* Rupee unlikely to gain much due to India's outlook
By Subhadip Sircar
MUMBAI, May 7 (Reuters) - The Indian rupee posted its biggest percentage gain against the dollar in six weeks on Monday after the country postponed controversial rules on foreign taxation by a year, helping soothe worries about flows.
The rupee extended gains in the afternoon session after Finance Minister Pranab Mukherjee told lawmakers that India will delay the General Anti-Avoidance Rule (GAAR) until fiscal 2013/14.
The local currency had already been propped up in morning trade by expectations of a more active central bank, with dealers saying the Reserve Bank of India had likely sold dollars soon after trade opened.
On Friday, the central bank on Friday announced measures to bolster currency inflows, signaling its intention to prop up a rupee that had taken a hit in recent weeks due to the uncertainty over GAAR and the concerns over India's fiscal and economic outlooks.
The main stock index, which was down as much as 1.9 percent in early trade, reversed losses to gain 0.5 percent.
"With GAAR implementation deferred by a year, inflows are likely to resume in the coming days, pushing USD/INR lower," Standard Chartered Bank said in a note.
The rupee rose 1.08 percent against the dollar, its biggest daily gain since March 27, to settle at 52.9050/9150 after falling to as low as 53.76 in intraday trade. It had closed at 53.47/48 on Friday,
Standard Chartered analysts expect immediate psychological support for the pair at 52.50, with a break of that leading to a test of 51.98, the 38.2 percent Fibonacci retracement of the up-move from 48.85 to 53.92.
Analyst don't expect significant falls in USD/INR over the longer-term, however. Worries about India, especially about its widening current account deficit, are unlikely to spur inflows, despite the removal of GAAR as a near-term risk, traders said.
The global risk environment is also worsening, as seen on Monday when the euro fell to a three month low following Greek and French election, while the disappointing U.S. jobs data is also adding to the caution.
The RBI's actions on Friday to relax the interest rate ceiling on certain foreign currency banks deposits of banks are unlikely to help the rupee, analysts added, while the central bank also has limited firepower for more forex interventions.
The one-month offshore non-deliverable forward contracts were at 53.23.
In the currency futures market, the most-traded near-month dollar-rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all ended around 53.19 on a total volume of $5.25 billion. (Editing by Rafael Nam)
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