Indian shares and the rupee strengthened in morning trade Wednesday after the government relaxed foreign investment rules in a host of sectors to boost sluggish growth and the ailing currency.

The rupee, which this year has been the worst performing currency among Asia's major economies, rose to 59.26 against the dollar from its previous close of 59.31, while the 30-share Sensex index was up 0.37 percent.

A group of Indian cabinet ministers late on Tuesday approved plans to remove the foreign investment cap in telecoms and relax overseas ownership rules in other sectors.

They also decided to abolish the need for government approval for certain levels of foreign investment in single-brand retail and petroleum refining. In insurance, it approved raising the FDI cap from 26 percent to 49 percent.

The government is seeking to woo investors and kickstart the struggling economy, which grew at a decade-low of five percent last year, and boost the rupee which has hit a string of lifetime lows in recent weeks.

The easing of the rules is the latest round of pro-business reforms from the scandal-tainted Congress-led government ahead of general elections due by May 2014.

"These measures, apart from boosting near-term sentiment, are medium-term positive as they will help attract stable long-term capital inflows," said Sonal Varma, economist with Nomura Securities.

Raamdeo Agrawal, co-founder of Motilal Oswal Financial Services, said: "The moves may not have an immediate impact, but the ground is being created."

The central Reserve Bank of India raised two short-term interest rates Monday, in its most aggressive step yet aimed at easing pressure on the rupee after it tumbled to a record low last week.