The rupee rose 4 paise to close at 83.96 (provisional) against the US dollar on Tuesday, tracking a recovery in the domestic equity markets after six consecutive sessions of free fall.

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A weakening dollar against international currencies further boosted the domestic unit, forex traders said, but added that a rise in crude oil prices and increased foreign fund outflows capped sharper gains.

Some experts said the markets rebounded following the BJP's victory in the Haryana assembly elections, which in turn helped the rupee.

At the interbank foreign exchange, the rupee opened at 83.97 against the greenback and traded in the range of 83.92-83.97 during the day. It settled at 83.96 (provisional) against the US dollar, 4 paise higher than its Monday's close of 84.00.

"The rupee gained... On positive domestic markets which recovered after the BJP, the ruling party in Haryana, won the state assembly elections for the third term, defying the exit polls. However, weak tone in global markets capped sharp gains," Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.

"We expect the rupee to trade with a negative bias on selling pressure from FIIs and geopolitical tensions in the Middle East. However, soft US dollar and a recovery in the domestic markets may support the rupee at lower levels," he said.

Meanwhile, the domestic equity markets rebounded after suffering losses for six consecutive trading sessions. While the Sensex jumped 584.81 points to settle at 81,634.81, the Nifty climbed 217.40 points to 25,013.15.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was down 0.13 per cent to 102.40.

Brent crude, the international benchmark, declined 1.90 per cent to USD 79.39 in futures trade.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, offloading shares worth Rs 8,293.41 crore on a net basis in the cash segment, according to exchange data.

Market participants also kept a close eye on the RBI's monetary policy to be announced on Wednesday. The reconstituted rate-setting panel of the Reserve Bank of India (RBI) has started deliberations on the next bi-monthly monetary policy.

In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have since reduced the interest rates.

"Investors may remain cautious ahead of the RBI's monetary policy meeting outcome on Wednesday. The RBI is expected to maintain status quo. USD-INR spot price is expected to trade in a range of Rs 83.80-84.20," Choudhary added.