The bank pegged the rupee at 54 per dollar by the end of 2009. The rupee fell by more than 19 per cent in 2008, as foreign funds pulled out of Asia's third largest economy, after asset markets across the world collapsed in the wake of the global financial crisis, it said in a note.

Although there could be more equity capital outflows, its main concerns were about softening of remittances due to worsening of labour markets and a steep drop in foreign direct investment, as global corporate finances have deteriorated.

"All said, we expect to see USD-INR move through 50 in relatively short order and hit 54 by the end of 2009," said Richard Yetsenga, a forex strategist at HSBC.

HSBC expects no foreign direct investment into Asia in 2009.

"While that may be overly pessimistic, the fall in FDI should certainly be spectacular, for global reasons if not the general deterioration in the security/political/corporate governance environment in India," said Yetsenga. In morning trade on Friday, the rupee was trading at 48.73/74, slightly weaker than 2008 close of 48.70.

Earlier this week, the government said investments by foreign firms through a joint venture where an Indian company has majority holding would not be treated as "indirect foreign investment".