Indian shares rose for a third consecutive session on Tuesday to approach a record high hit on June 11. The gains came after overseas investors bought shares worth $214.42 million on Monday, their biggest single-day buying since June 12.
The Reserve Bank of India also did not buy dollars on Tuesday, after a recent string of interventions.
The central bank bought a net $14.51 billion in the forward market in May compared with net forward dollar sales of $6.09 billion in April, according to Reuters calculations based on data available on the RBI's website.
However, the rupee is expected to continue to remain in a tight range ahead of the federal budget on July 10 with the geo-political situation in Iraq also being closely monitored.
"Overall rupee is in a range of 59.80 to 60.40, but one can expect the rupee to rise above 59.80 after the next critical trigger of budget 2014," said Hemal Doshi, a currency strategist at Geojit Comtrade Ltd.
The partially convertible rupee closed at 60.07/08 per dollar compared with 60.17/18 on Monday.
Foreign funds have bought shares worth $2.36 billion and debt worth $2.85 billion so far in June, taking total inflows in the year to $9.96 billion and $10.41 billion respectively in the two segments.
A firm trend from regional markets on upbeat manufacturing data from China also helped. In India, the HSBC Manufacturing Purchasing Managers' Index, compiled by Markit, advanced to 51.5 in June from 51.4 in May, expanding at the fastest pace in four months.
In the offshore non-deliverable forwards, the one-month contract was at 60.34/44, while the three-month was at 60.95/61.05.
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