Sept. 27 (Bloomberg) -- India's rupee, which reached its strongest since April 1998 yesterday, climbed for a fourth day on optimism a rally in local stocks will prompt investors to increase investment in the country.

The currency headed for a fifth quarterly gain as the nation's benchmark share index touched a record for a seventh day. Funds based abroad bought more local equities in the five days through Sept. 25 than they did during the whole of last month, data from the stock market regulator show.

``The rupee will continue to appreciate in the medium term because there's ample supply of dollars,'' said Rohan Lasrado, a currency trader at HDFC Bank Ltd. in Mumbai. ``Investment inflows remain very strong, both stock market and private equity flows.''

The rupee rose 0.2 percent to 39.635 per dollar as of 10:30 a.m. in Mumbai, according to data compiled by Bloomberg. It advanced as high as 39.62 yesterday. The currency may climb to 39 in the next two months, Lasrado said.

Overseas investors bought shares worth $1.93 billion more than they sold from Sept. 19 to Sept. 25, the most in a five-day period since July 5, according to the Securities and Exchange Board of India. They invested a net $1.44 billion in the month ended Sept. 18.

The Bombay Stock Exchange's Sensitive Index rose as high as 17,158.49 today. Asia's fourth-largest economy grew 9.3 percent in the three months ended June 30, accelerating from 9.1 percent in the previous quarter.

India received private equity investments totaling $10.8 billion in the first seven months of 2007, compared with $7.86 billion in the whole of 2006, the Economic Times reported Sept. 17, citing Grant Thornton LLP, a U.S.-based accounting firm.

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

Last Updated: September 27, 2007 01:05 EDT