Rupee fell for a second day on speculation outflows of funds from the stock market and higher oil prices will boost demand for foreign currency.

The currency declined to near a 14-month low as accelerating inflation and prospects of slowing economic growth prompted investors to sell local equities. Data from the capital markets regulator showed overseas funds sold more Indian shares than they bought on 18 of the past 21 trading days. Asian equities declined for the first time in five days, adding to speculation funds based abroad will further reduce investments in the region.

``Stock markets elsewhere have shown declines, renewing concerns about capital outflows,'' said Amit Garg, a Mumbai- based currency trader at Allahabad Bank. ``The rupee opened weaker because of that.''

The rupee weakened 0.1 per cent to 42.935 per dollar as of 9:34 am in Mumbai, from 42.905 yesterday, according to data compiled by an agency. The currency may trade between 42.88 and 42.98 today, Garg said.

Wholesale prices rose 8.75 per cent in the last week of May from a year earlier, the most since 2001, while the central bank expects the economy will expand as little as 8 percent in the year ending March 31, from 9 per cent last year.