MUMBAI (Reuters) - The rupee gained for a second day on Wednesday as another strong rise in the share market buoyed by hopes for more capital inflows, amid signs of easing risk aversion following a rise in equity markets globally.The partially convertible rupee closed at 48.64/65 per dollar, 0.7 percent stronger than its Tuesday's close of 48.96/97. On Monday, the rupee dropped to as low as 49.47, its weakest since May 15. "The rupee was basically following the equity market today, but there was some dollar demand seen in the market which kept the rupee from rising further," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank. The BSE Sensex rallied 2.9 percent, gaining for a second day, as upbeat results from U.S. firms Goldman Sachs and Intel helped shore up investor confidence worldwide. Inflows into and out of the sharemarket have been a key factor determining the rupee's fortunes in the past couple of years. Inflows of $5.9 billion so far in 2009, have helped the rupee claw back from record lows of 52.2 hit in early March. Last year, when the stock market saw record outflows of more than $13 billion, the rupee fell by a fifth. "In the very short term, the dollar-rupee is likely to come down to around 48 levels, with the euro also looking to gain," said P.V. Shreedharan, head of foreign exchange trading at Development Credit Bank.He, however, added that in the next two to three months the rupee could also weaken to test 50 levels.
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