Rupee gains as state-run banks sell dollars

MUMBAI (Reuters) - The rupee gained in afternoon trade on Wednesday on heavy dollar sales by state-run banks to help the local unit recover from fresh five-year lows, but concerns about capital outflows continued to weigh.

* At 1 p.m., the partially convertible rupee was at 46.88/89 per dollar, after having fallen to 47.2350 in opening deals, its weakest since June 2, 2003, but stronger than its previous close of 46.95/96 on Monday.

* Comments by Reserve Bank of India deputy governor Shyamala Gopinath that it was watching the foreign exchange market as usual, also aided the rupee's rise.

* Dealers said some companies were selling their fresh dollar holdings on expectations the rupee may have bottomed out around current levels.