Mumbai, Sep 15 (PTI) The rupee rose by 18 paise to close at 73.50 against the US dollar on Wednesday on hopes of foreign fund flows after the government approved reforms in the telecom sector and an incentive scheme for automotive and drone sectors.

Gains in the domestic equity markets and weakness in the dollar in overseas markets after softer-than-expected US inflation numbers also supported the rupee sentiment.

At the interbank forex market, the local unit opened flat at 73.68 against the greenback. During the session, the domestic unit witnessed an intra-day high of 73.50 and a low of 73.74.

In the previous session, the rupee had settled at 73.68 against the US dollar.

"Indian rupee appreciated after two days of downward swing following weakness in dollar index, foreign fund inflows, better than expected economic data and risk-on tones," said Dilip Parmar, Research Analyst, HDFC Securities.

Spot USDINR is facing a stiff resistance at 73.95 and support around 73.40. The pair likely to consolidate in range of 73.40 to 73.95 before the next week’s Fed policy meeting, Parmar said.

According to Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services, the rupee consolidated in a narrow range but rose in the last hour of the day following reform-related announcements by the government.

In a big bang reforms, the Union Cabinet on Wednesday approved a relief package for the telecom sector that includes a four-year moratorium on payment of statutory dues by telecom companies as well as allowing 100 per cent foreign investment through the automatic route.

Moreover, the Union Cabinet on Wednesday approved a Rs 26,058-crore production linked incentive (PLI) scheme for auto, auto-components and drone industries to enhance India's manufacturing capabilities.

"These announcements could lead to fund inflows and that led to strength in the rupee," Somaiyaa said.

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd said, "Global markets remain risk-on and that is favouring the rupee. However, the pair continues to trade within a broad range of 73.00 and 74.00." Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.17 per cent to 92.46 after softer-than-expected US inflation numbers.

Brent crude futures, the global oil benchmark, rose 1.36 per cent to USD 74.60 per barrel.

On the domestic equity market front, the BSE Sensex ended 476.11 points or 0.82 per cent higher and touched a lifetime high of 58,723.20, while the broader NSE Nifty advanced 139.45 points or 0.8 per cent to a record 17,519.45.

Foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth Rs 1,649.60 crore, as per exchange data.