The Indian rupee ended slightly lower on Monday, shaking off early weakness as a stock market surge kept foreign investment coming in. The unit closed at 43.4700/4800 per dollar, bouncing back from the day's low of 43.65 to end only marginally below Friday's five-year closing peak 43.4500/4700. "There were foreign portfolio investments into the stock market.

We could also see inflows into Indian companies' ADS (American Depository Shares) issues later this month, which will help the rupee's rally to continue," said a dealer at a private bank.

"But the rupee is overvalued by about 2 percent on a real trade-weighted basis."

Among other American Depository issues, India's second-biggest commercial bank ICICI Bank said last month it plans to issue up to 6 percent of its equity capital worth, or around $375 million.

Record portfolio investment of nearly $8.5 billion into Indian shares in 2004 helped the currency rise by 4.9 percent in 2004, after a gain of 5.2 percent the previous year.

These inflows are expected to continue as the economy remains on a strong footing, enjoying consumption- and investment-led growth.

Traders said the dollar's overseas gain seen earlier in the day was temporary and persistent imbalances in the US economy were likely to continue to weigh on the greenback in 2005.

Copyright Reuters, 2005