Senior bankers and foreign exchange dealers do not expect any major changes in the forex flows immediately, even as Finance Minister Jaswant Singh announced a slew of measures taking the country one step forward towards full convertibility of the rupee.

The rupee dropped today after a four-day rise against the greenback as public sector banks bought dollars on behalf of the central bank. The Indian unit finished at 47.9700/47.9750 per dollar, down 0.07 per cent from its previous close of 47.9350/47.9400. Traders said the currency did not react to news that the government had relaxed overseas investment norms.

Forwards ended a bit firmer. The benchmark six-month forward closed up at 3.54 per cent, against its previous 3.48 per cent.

The finance minister's announcement aims at triggering demand for dollars. However, a series of such measures have already taken by the central bank. "But sentiment towards the dollar does not get altered merely because regulations now permit you to freely invest in it," said a forex dealer.

According to HDFC Bank's treasurer Sudhir Joshi, the measures are a symbol of confidence that the finance ministry and the Reserve Bank of India have on the balance of payment situation.

"The foreign exchange reserves are strong enough. If permission to invest abroad is granted, it does not mean that overnight there will be an outflow of forex. Without infrastructure in place, individuals are not going to invest overseas," he point said.

UTI Bank's senior vice president and treasurer P Mukherjee added that there will not be an major impact on the rupee as the inflows will continue to remain strong.

"The message from the FM is clear: the economy is being opened up. But even though Indian financial institutions could invest overseas, there has not been any significant investment. The future of the rupee would depend on how the dollar will react to the overseas currencies. And this will depend on the US economy,"  said IDBI Bank's head of money and forex market, U Venkatraman.

The reforms could also lead to more forex inflows into the economy than outflows. Joshi said that a country that has fewer restrictions is more attractive for overseas investors.

The consensus among forex dealers is that with the RBI facing liquidity management problems due to its relentless mop up of dollars, it is but apt that norms pertaining to overseas investments are relaxed further. If despite this the central bank is still unable to tackle the surfeit of liquidity, then an announcement on pre-payment of forex debt could be expected, dealers said.

"India is probably the safest place to invest. When foreign institutional investors are flocking to the country, why should Indian corporates and individuals go abroad," wondered a chief dealer with a public sector bank.