By V. Ramakrishnan Feb. 1 (Bloomberg) -- India’s rupee declined as the benchmark stock index fell to the lowest level in almost three months, fueling speculation overseas investors will pare holdings of the nation’s assets. The currency dropped to a one-month low on lingering concern policy tightening in China will cool a global economic recovery and hurt trade. The rupee also weakened as a gauge that tracks the dollar against a basket of currencies rose to its highest level since July before a U.S. report that analysts forecast will show manufacturing expanded for a sixth month. “There is a lot of buying of dollars across all Asian countries as the U.S. economy seems to be improving,” said Madhusudan Somani, head of foreign-exchange trading at Yes Bank in Mumbai. “Equities are in correction mode and it looks like there will be some more downside in the near term.” The rupee fell 0.4 percent to 46.3475 per dollar as of 10:40 a.m. in Mumbai, according to data compiled by Bloomberg. It earlier touched 46.44, the lowest level since Jan. 4. [bn:WBTKR=FIINNET$:IND] Overseas funds [] sold a net $467.2 million of Indian shares on Jan. 28, the biggest one-day sale in more than 15 months, according to the nation’s stock market regulator. Offshore contracts indicate bets the rupee will trade at 46.48 to the dollar in a month, compared with expectations of 46.30 on Jan. 29. Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non- deliverable contracts are settled in dollars rather than the local currency. India’s Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 0.1 percent, adding to two weeks of losses. To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net.

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