MUMBAI (Reuters) - The rupee won't extend recent sharp gains in the short-term on expectation a correction in domestic shares may reduce foreign inflows, a senior forex trader at a private bank said. The partially convertible rupee has gained 0.8 percent in 2010 to trade at 46.15 per dollar at 2:20 p.m. and is up 13 percent from a record low of 52.2 a dollar hit in early March. The benchmark stock index rose 81 percent in 2009. "Overall, things are not showing that a recovery is near. I am not confident that the momentum in our market will sustain," said P.V. Sreedharan, chief forex dealer with Development Credit Bank (DCB) at Mumbai. "I am expecting a correction. It can be a W-shaped recovery for our economy," he added. Foreigners had bought more than a net $17 billion in 2009 and have so far purchased about $1.5 billion this year, driving up the stock market as well as the Indian currency.. In the long-term, however, the rupee will strengthen to about 44 by the end of the next fiscal year ending March 2011, he said. The rise would be gradual and will depend on stocks performance and the dollar's strengthening in the near-term. "I do not expect the 45 level to be broken that easily," he said. Things may improve going forward, but at a slightly faster pace in the U.K. and Europe, compared with the US, said Sreedharan, who expects no policy rate hikes in all the three economies for the next six months. "Until August I don't see any rate hikes in the U.S., U.K. and Europe. The scenario doesn't look like supporting it." (Reporting by Boby Michael; Editing by Ramya Venugopal)

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