Mumbai, May 30:

The Indian rupee hit a year low of 46.28 against the dollar today on sales of Indian equities by overseas funds and month-end dollar demand from importers and oil companies, analysts said.

Analysts say as a result India could face a growing current account deficit by the year end as demand for imports in its booming economy grows.

“We expect the rupee to depreciate further (to 47.5) by the year-end,” said Siddarth Mathur, India strategist with J P Morgan Securities.

The partially-convertible rupee has weakened steadily in the past two weeks, triggered by foreign funds keen to take dollars back home after the US-Federal Reserve recently hiked benchmark interest rates to five per cent.

Large global funds and high net worth individuals tend to withdraw funds in overseas markets and chase higher returns, analysts say. Overseas funds invested a record $10.7 billion in Indian equities in 2005 and had helped drive the market to record highs in early 2006. But the funds have turned into net sellers after the benchmark 30-share Sensex index peaked at an intraday record high of 12,671.11 on May 11.