Indian rupee climbs as oil falls, stocks rally

(Updates to early deals)

MUMBAI, July 9 (Reuters) - The Indian rupee strengthened on Wednesday after oil prices fell sharply, easing concerns about inflation and global credit crisis worsening further. A stocks rally also underpinned the market.

At 10:48 a.m. (0518 GMT) the partially convertible rupee <INR=IN> was at 43.1625/1700 per dollar, 0.2 percent stronger than Tuesday's close of 43.26/27. It had hit a 15-month low of 43.50 per dollar last week.

"The oil prices are down, so offshore arbitrage related dollar demand is not there, and even equity is picking up," said L. Subramanian, head of treasury at ICICI Bank.

"There is some improvement on the political front as well and so the sentiment has slightly changed," he added.

The rupee is likely to trade in a band of 43.08 to 43.15 through the rest of the session, with a strengthening bias traders said.

Oil CLc1, India's biggest import, was steady above $136 a barrel after having fallen more than $5 on Tuesday, pushing losses so far this week to about $10. [O/R].

India's main share index rallied more than 3.5 percent in early trade, helped by lower global oil prices and hopes the government would revive stalled economic reforms after the communist allies quit the coalition.

A regional party, whose support appears crucial for the survival of the government, said on Tuesday it would not be "rigid" on economic issues but wants a mechanism through which it can influence policy making. See: [ID:nDEL35324]