Indian rupee off 5-yr low, but outflows weigh

* Dollar sales by state-run banks help trim losses

* Cbank says watching currency market as usual (Updates to mid morning)

MUMBAI, Oct 1 (Reuters) - The rupee INR=IN bounced off five-year lows on Wednesday after state-run banks sold dollars heavily, but concerns about capital outflows weighed on the Indian unit.

By 10:35 a.m. (0505 GMT), the partially convertible rupee INR=IN was at 47.012/13 per dollar after falling to 47.2350 in opening deals, its weakest since June 2, 2003 and down 0.6 percent from the previous close of 46.95/96.

At the low, the rupee had lost 16.6 percent in 2008 making it among the worst performing Asian currencies. In 2007, the rupee had gained more than 12 percent.

"Companies, refiners, foreigners are all buying dollars," said a senior dealer at a foreign bank, who expected the rupee to trade in a broad 46.90-47.20 band on Wednesday.

He said the state-run banks, which usually act on behalf of the central bank, were the only ones selling dollars.

The central bank is watching the foreign exchange market as usual, Shyamala Gopinath, deputy governor at the Reserve Bank of India said on Wednesday. [ID:nBOM69927]

Traders said heavy withdrawals by foreign funds from Indian shares had put pressure on the rupee, and the outlook remained grim with the spreading global financial crisis.