Nov. 10 (Bloomberg) -- India’s rupee fell as the benchmark stock index snapped a four-day gain, adding to concern overseas investors will slow purchases of the nation’s assets.

Average daily investment in local shares by foreigners is $36 million so far this month compared with $88 million in October and $207 million in September, data from the Securities & Exchange Board of India show. The currency also ended a four- day advance as the Bombay Stock Exchange’s Sensitive Index lost as much as 0.8 percent. Moody’s Investors Service indicated today that Indian finances need to improve before it can win a credit-rating upgrade.

“The rupee’s weakness reflects the trend in equities, which have turned negative since the morning,” said Roy Paul, assistant manager of treasury at Federal Bank Ltd. in Mumbai. “There is some concern that volatility in the stock market may affect capital inflows.”

The rupee dropped 0.2 percent to 46.535 per dollar as of 2:37 p.m. in Mumbai, after declining 0.4 percent earlier to 46.6250, according to data compiled by Bloomberg. It yesterday touched 46.3525, the highest level since Oct. 21.

India’s National Stock Exchange Volatility Index, a gauge that tracks swings in equities, rose to 28.9 today from 25.4 at the end of last month, data compiled by Bloomberg show.

Offshore contracts indicate bets the rupee will trade at 46.56 against the dollar in a month, compared with expectations of 46.40 yesterday. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non- deliverable contracts are settled in dollars rather than the local currency.

Finance Minister Pranab Mukherjee said in July that the budget deficit will rise to 6.8 percent of gross domestic product, the most since 1994, in the year ending March 31 as the government spends more to revive economic growth.

“Unless we see some hope for signs of improvement in government finance, India’s rating won’t be raised,” Tom Byrne, Moody’s senior vice president, said in an interview in Shanghai. “We don’t see that yet.”

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

Last Updated: November 10, 2009 04:09 EST