Market Down On accounts of Helping Exporters?

MUMBAI (Reuters) - The rupee edged up after some opening volatility on Friday, with dealers debating whether overseas investors would see a steep fall in the stock market as a buying opportunity or a reason to withdraw some funds.

At 9:50 a.m., the partially convertible rupee was at 39.76/77 per dollar, a touch stronger from Thursday's close of 39.7725/39.7800.

Last week it had hit 39.27, its strongest since March 1998.

"It's not the easiest market to trade at the moment, there's a lot of volatility and no clear direction, but the clear focus is on stocks," said the chief dealer with a foreign bank.

The benchmark share index fell more than 2 percent in early deals, which did not augur well for the rupee, the dealer added.

The rupee slipped more than half a percent on Thursday as shares slipped nearly 4 percent on worries about curbs to a method foreigners could use to buy stocks.

The finance minister said in the United States on Thursday that India had no plans to impose controls on capital flows, but a recent surge of funds into the country required some measures to ward off stock market bubbles.

The rupee is still up more than 11 percent against the dollar this year, powered by robust overseas investment, a large portion of which has flown into the stock market.

Oil surged to a record high of $90.02. India imports about 70 percent of its oil and high prices could widen its trade deficit and weaken the rupee.

Still, dealers said that the rupee would take its lead mainly from equity-related flows, with other factors not as important.

"It's only stocks that are dominating at the moment, the rest is in the distant background," said a dealer with a private bank.