Indian rupee drops towards 13-mnth lows, oil hurts

MUMBAI, May 21 (Reuters) - The Indian rupee <INR=IN> headed towards 13-month lows on Wednesday as record oil prices raise concerns of a widening trade deficit, and losses in Asian stock markets raise concerns about foreign demand for local stocks.

* At 9:04 a.m. the partially convertible rupee was at 42.77/78 per dollar, weaker than Tuesday's close of 42.635/640. It hit a low of 42.92 last Friday, its weakest since mid-April 2007.

* Asian stocks fell for a second consecutive day on Wednesday, feeding a rally in government bonds, as fears about consumer demand in the face of high oil prices rattled investors. See [ID:nSP108654].

* Oil CLc1, India's biggest import, has surged to record highs over $129 a barrel, raising the risk of a widening trade deficit. India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars. (Reporting by Saikat Chatterjee; Editing by Prem Udayabhanu)