The rupee pared its initial gains and was trading 22 paise lower at 74.87 against the US dollar on Tuesday, even as the domestic equity market was trading with significant gains.

Investors were cautious after Finance Minister Nirmala Sitharaman on Tuesday said that the fiscal deficit in 2021-22 will be 6.9 per cent of GDP and 6.4 per cent in 2022-23, forex traders said.

Moreover, elevated crude oil prices and firm American currency weighed on investor sentiments. At the interbank foreign exchange, the rupee opened at 74.53 against the American dollar, then inched higher to quote 74.41 in early trade.

Later, the local unit pared the gains and touched an early low of 74.87 against the greenback. In the previous session, the rupee had settled at 74.65 against the greenback.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.02 per cent higher at 96.55. On the domestic equity market front, the 30-share Sensex was trading 873.21 points or 1.51 per cent higher at 58,887.38, while the broader NSE Nifty advanced 247.55 points or 1.43 per cent to 17,587.40.

Global oil benchmark Brent crude futures rose 1.31 per cent to USD 91.21 per barrel. Foreign institutional investors were net sellers in the capital market on Monday, as they offloaded shares worth Rs 3,624.48 crore, as per stock exchange data.