By Rajendra Jadhav
MUMBAI, Oct 10 (Reuters) - India's gold imports in September dropped more than 14 percent from a year ago as a rally in local prices due to a depreciating rupee reduced demand in the world's second-biggest consumer of bullion, provisional data from precious metals consultancy GFMS.
The drop in demand from Indian importers could weigh on global prices XAU= , which have dropped 8.8 percent so far this year.
But lower imports could help the South Asian country reduce its trade deficit and support the rupee INR=IN , which hit a record low this week.
"In August demand was good but it fell in September due to higher prices," said Asher O., managing director of the India operations at Malabar Gold and Diamonds, a leading jeweller.
The Indian rupee has fallen almost 14 percent in 2018, lifting local gold prices MAUc1 to 31,531 rupees per 10 grams earlier this week, the highest level in nearly five months.
India's gold imports in August nearly doubled from a year ago to 85.7 tonnes to hit their highest level in 15 months as lower prices prompted manufacturers to stock up for a jewellery exhibition. jewellers were carrying ample inventory from August and retail demand was also weak due to Shradh period - a fortnight for paying homage to ancestors - in September, said a Mumbai-based dealer with a private bullion importing bank.
Shradh ended on Oct. 8, giving way to a string of festivals.
"In October, again imports will rise due to festivals," said Bachhraj Bamalwa, a bullion dealer based in Kolkata, formerly the Chairman of the All India Gems and Jewellery Trade Federation.
Demand for gold usually strengthens at the end of the year on purchases for the traditional wedding season and major festivals including Diwali and Dussehra, when bullion buying is considered auspicious.
Investment demand has also started to improve due to a falling stock market .NSEI and the depreciating rupee, said a bullion dealer based in southern Indian city Chennai.
"Investors are not sure how much the rupee can fall. That's why they are hedging risk by investing in gold," the dealer said.
For the first nine months of 2018, Indian gold imports fell 15 percent from a year earlier to 552.8 tonnes, data compiled by GFMS showed.
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