Rupee ends off 3-1/2 month high; NTPC flows awaited

An employee arranges Indian currency notes at a cash counter inside a bank in Agartala, June 3, 2010.

MUMBAI (Reuters) - The rupee fell on Monday, retreating from a three-and-a-half-month high touched earlier in the session, hit by a fall in domestic shares although inflows from an upcoming government stake sale could support the local currency this week.

The government is looking to raise about $2 billion through a stake sale, likely on Thursday, in state-run power producer NTPC Ltd (NTPC.NS), with dealers expecting foreign fund inflows between $300 million and $500 million for the transaction.

Upcoming government share sales in February and March will include state trading company MMTC Ltd (MMTC.NS) and steel maker Steel Authority of India Ltd (SAIL.NS). The government has already raised $585 million by selling shares in Oil India Ltd (OILI.NS).

The disinvestment programme will be critical if the government is to meet its fiscal deficit target of 5.3 percent of gross domestic product for the year ending in March and reduce concerns about India's current account deficit.

"The rupee move to below 53 today is indicating that the panic related to the current account deficit is subsiding. This typically puts the buyers at ease and adds pressure on sellers," said Satyajit Kanjilal, chief executive at Forexserve.

The partially convertible rupee closed at 53.285/295 per dollar versus its previous close of 53.19/20.

The rupee rose as high as 52.91 earlier in the session, its highest level since October 18, for which dealers cited about $250 million of inflows from a state-run power finance firm as aiding it.

However, falling domestic shares sent the rupee lower, with the Sensex ending down 0.15 percent.

The euro also retreated from its 14-month high against the dollar, hit on Friday, as speculators took profits, with investors also cautious before a European Central Bank meeting on Thursday.

In the offshore non-deliverable forwards, the one-month contract was at 53.55 while the three-month was at 54.11.

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 closed at around 53.47 with a total traded volume of $5.21 billion.

(Editing by Anupama Dwivedi)