The Indian rupee appreciated by 20 paise to 46.76 a dollar in early trade at the Interbank Foreign Exchange today on fresh capital inflows by foreign funds into equities.
However, the US currency's gains against major currencies overseas, capped the rupee's rise.
The domestic currency had closed 15 paise lower at 46.96/97 after hitting a six-and-a-half-months low of 47.33 in the previous session.
Forex dealers said the rupee strengthened against the US currency largely on the back of increased capital inflows by foreign funds into equities.
Meanwhile, the Bombay Stock Exchange benchmark Sensex surged 279.30 points, or 1.69 per cent at 16,724.91 points in the opening trade today.