The rupee appreciated 6 paise to 78.27 against the US dollar in opening trade on Monday as heavy buying in domestic equities and weakness in the greenback strengthened investor sentiment.
However, elevated crude prices and persistent foreign fund outflows restricted the rupee's gain, forex dealers said.
At the interbank foreign exchange, the rupee opened sharply up at 78.24 against the US dollar, then inched lower to quote 78.27, registering a gain of 6 paise over the last close.
In the previous session, the rupee had closed at its all-time low of 78.33 against the US dollar.
On the domestic equity market front, the 30-share Sensex was trading 589.05 points or 1.12 per cent higher at 53,317.03, while the broader NSE Nifty advanced 179.65 points or 1.14 per cent to 15,878.90.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.14 per cent to 104.03.
Global oil benchmark Brent crude futures rose 0.57 per cent to $113.77 per barrel.
Foreign institutional investors remained net sellers in the capital market on Friday as they offloaded shares worth Rs 2,353.77 crore on a net basis, as per exchange data.
Foreign investors continue to desert Indian equity markets and pulled out close to Rs 46,000 crore so far this month following monetary policy tightening by the Reserve Bank and US Federal Reserve, high oil prices, and volatile rupee.
The net outflow by foreign portfolio investors (FPIs) from equities reached Rs 2.13 lakh crore till now this year, data with depositories showed.
Given the policy normalization narrative by the US Fed and other major central banks, coupled with high oil prices and volatile rupee, FPIs are likely to stay away from emerging market assets, Hitesh Jain, Lead Analyst - Institutional Equities, Yes Securities, said.