By Subhadip Sircar
MUMBAI (Reuters) - The rupee fell to a more than five-week low on Thursday after Standard & Poor's said the country may face a rating downgrade next year if the new government fails to revive economic growth and on reports that oil refiners have resumed buying some of their dollar requirements from the market.
S&P said it may cut India's sovereign rating to below investment grade should the next government fail to provide a credible plan to reverse the country's low economic growth.
Current projections suggest that neither of the two main political formations is likely to get a majority, making them dependent on regional parties, which will effectively make the reform process more difficult.
"Traders have started covering their dollar short positions since yesterday on the talk of the oil dollar window taper. The S&P comments seem to suggest that they will hold off on any rating downgrade till the general elections," said Navin Raghuvanshi, vice president at Development Credit Bank.
"The strengthening of the rupee may take some time," he said.
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The rupee was also hit by reports quoting economic affairs secretary Arvind Mayaram as saying that 30-40 percent of the state-run companies' oil demand has returned to markets.
Consistent dollar buying by some state-run banks in recent sessions had led to speculation that refiners were meeting some of their dollar demand directly from the market.
The partially convertible rupee closed at 62.41/42 per dollar compared with 62.39/40 on Wednesday. It fell to an intra-day low of 62.73, its lowest since September 30.
Dealers cited some Reserve Bank of India intervention at the day's lows and towards the end of the session to support the rupee.
The rupee will struggle to gain any ground in the next 12 months due to uncertainty around elections, the country's external deficit and the impact of a possible tapering in the U.S. Federal Reserve's stimulus programme, a Reuters poll showed.
In the offshore non-deliverable forwards, the one-month contract was at 63.06, while the three-month was at 64.11.
(Editing by Subhranshu Sahu)