Dec 22 - India's gold demand was moderate on Wednesday as prices softened a touch on the back of a stronger rupee, but traders said the underlying appetite remained strong and many buyers kept to the sidelines waiting for bigger dips as the year-end drew closer.

A gold jewellery store in Kolkota, India

"Demand is not bad for these prices," said Naresh Devatha of Micro International, a Bangalore-based wholesaler. "But many people are waiting for it to fall more."

Indian gold prices, that generally track overseas markets, fell slightly as the rupee strengthened against the dollar, making the import-driven commodity slightly cheaper in the local market.

Traders said the wholesale market would be eyeing bigger falls to stock up for the next busy season to start by mid-January after the Makar Sankranti festival that marks the start of winter-sown crop harvest.

Retail demand, that has slowed down after the festivals ended in November, is also expected to pick up after Makar Sankranti for Hindu weddings.

"People are expecting 21,500 rupees per 10 grams levels as we go into the new year, so they are buying now," said Rahul Gupta of PP Jewellers, a retail chain in New Delhi.

(Reporting by Ruchira Singh; editing by Sunil Nair)