* India's June trade deficit narrows to $10.3 bln
* Foreign flows also helps support rupee
* WPI data on Mon seen key ahead of RBI policy review
By Subhadip Sircar
MUMBAI, July 13 (Reuters) - The Indian rupee rallied on Friday to notch its third consecutive weekly gain after a narrowing trade deficit helped ease concerns about the country's fiscal outlook, while signs of foreign flows also helped.
Imports fell sharply in June, partly because of lower global oil prices, narrowing the trade deficit in June and providing a silver lining for a country facing concerns about its record high current account deficit.
Traders also cited strong buying by foreign investors into Indian debt and stock markets this month, which analysts have attributed in part to hopes for government policy reforms after the presidential elections on July 19.
"Oil imports have been coming down which is helping rein in the deficit. Foreign investors are also gradually bringing in money to invest in the new limits won in the debt auction," said K.N. Dey, director at Basix Forex.
"The rupee has recovered partially. It remains to be see what reforms the government implements after the Presidential elections," he said.
The partially convertible rupee closed at 55.14/15 as per the SBI closing rate, from its Thursday close of 55.93/94. The rupee's 1.4 percent gain for the session was its biggest in over a week.
The local currency rose 0.5 percent for the week, marking its longest weekly winning streak in five months, despite rising worries about the global economy that have pressured global risk assets this week.
Foreign investors have injected a net of $1.63 billion in Indian markets so far this month. Some of the flows are seen tied to the auction of investment debt limits earlier this month, despite attracting more tepid-than-expected demand.
On Friday, dealers also cited large inflows in spot markets, which some said was related to a British telecom company.
The rupee has recovered sharply since hitting a record low of 57.32 on June 22. The gains have been reflected in offshore non-deliverable forward contracts, with one-month contracts quoted at 55.40, while the three-month were trading at 56.06.
Investors are now eyeing the inflation data on Monday, with a Reuters poll forecasting wholesale price inflation likely rose by 7.62 percent in June from a year ago, the highest rate so far this year.
However, lower-than-expected inflation could provide room for the Reserve Bank of India to consider cutting interest rates at its July 31 policy review and help ease some of the worries about India's fiscal and economic outlooks.
In the currency futures market, the most traded near-month dollar-rupee contract on the National Stock Exchange, the United Stock Exchange and the MCX-SX all ended at around 55.25. The total volume was at $5.6 billion. (Editing by Rafael Nam)