By Rajendra Jadhav

MUMBAI (Reuters) - India's gold imports may rise in the fourth quarter as investors seek alternatives to faltering equity markets and a plunging rupee at the same time traditional buying will rise during the festival season, said multiple sources involved in the market.

Increased buying by the world's second-biggest gold consumer would support global prices that have traded roughly near $1,200 an ounce since late August, but also widen India's trade deficit and add to pressure on the Indian rupee, which fell to a record low on Wednesday.

In the fourth quarter of 2018, gold imports could rise 9 percent from a year ago to 250 tonnes, said Bachhraj Bamalwa, a bullion dealer based in Kolkata who was formerly the Chairman of the All India Gems and Jewellery Trade Federation.

"In the December quarter, festival demand would be robust. Investment demand is also gaining traction," said Bamalwa.

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.

In the fourth quarter of 2017, India imported 229.6 tonnes of gold, according to metals consultancy GFMS.

Gold investment demand may rise as falling stock markets have prompted investors to diversify their portfolios, Bamalwa said.

India's NSE equity index has fallen 7 percent from a record peak in August, while local gold futures have risen 6 percent since the recent low hit in mid-August.

"Rupee is consistently falling and we don't know how much it will fall further. It is prompting investors to hedge their risk with exposure to gold," said Daman Prakash Rathod, a director at MNC Bullion, a wholesaler in Chennai.

The rupee has fallen...

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