Indian rupee rises as rally hopes trigger dlr sales

* Exporters liquidate dollar holdings on rupee rally hopes

* Main share index ends almost 1 pct lower

(Updates to close)

By Anurag Joshi

MUMBAI, Oct 30 (Reuters) - The Indian rupee closed higher for a second straight day on Friday, erasing earlier losses triggered by a fall in local share prices, as exporters sold dollars expecting a further strengthening of the local unit. The partially convertible rupee INR=IN ended at 46.96/97 per dollar, about 0.5 percent stronger than its 47.21/22 close on Thursday, when it touched a low of 47.6250, its weakest since Oct. 5.

It touched an intra-day high of 46.84 on Friday.

"The rupee had weakened in line with the stock market. But, with signs of the rupee's gains seeming sustainable, exporters sold dollars," said a senior dealer with a foreign bank.

Indian shares fell 7.2 percent in October and logged their biggest monthly fall in a year, after they closed 1 percent lower on Friday. [.BO]

Foreign portfolio inflows into local shares are a key driver of the rupee. Foreigners have bought more than $14 billion of local equities so far this year, after being sellers of more than $13 billion in 2008.