The rupee slumped to a record low of 68.75 per dollar and shares tumbled
on Wednesday on growing worries that foreign investors will continue to
sell out of a country facing stiff economic challenges and volatile
global markets.
Foreign investors sold nearly $1 billion (over Rs. 6,500 crore) of Indian shares in the eight sessions through Tuesday - a worrisome prospect given stocks had been the country's one sturdy source of capital inflows, although net purchases so far this year still total $12 billion.
The partially convertible rupee hit a record low of 68.75, down 3.7 per cent on the day, after posting its biggest daily percentage fall in 18 years on Tuesday.
"It is just impossible to put any realistic value to the rupee any more," said Uday Bhatt, a forex dealer with UCO Bank.
The need to attract foreign capital is critical for a country whose record high current account deficit is a key reason behind the rupee's slump. Yet policymakers have consistently struggled to come up with measures that can convince markets they can stabilise the currency and attract funds into the country.
That failure is becoming an increasing source of tension for India at a time when fears of a possible U.S.-led military strike against Syria are knocking down Asian markets, with prospect that the Federal Reserve will end its period of cheap money as early as next month further raising concerns.
In its latest initiative, the government late on Tuesday proposed setting up a task force to look into currency swap agreements, a measure analysts said could bring some relief if carried out in time by reducing market demand for dollars or other major currencies.
"Lets see what the authorities do, but if the government can come out with some really big currency swap arrangement with some countries, that can be a strong positive," Bhatt said.
The rupee has now fallen around 19 per cent so far this year, by far the biggest decliner among the Asian currencies tracked by Reuters.
Meanwhile, the Nifty fell more than 2 per cent while 10-year bonds yields rose to as high as 9.04 per cent.
Foreign investors sold nearly $1 billion (over Rs. 6,500 crore) of Indian shares in the eight sessions through Tuesday - a worrisome prospect given stocks had been the country's one sturdy source of capital inflows, although net purchases so far this year still total $12 billion.
The partially convertible rupee hit a record low of 68.75, down 3.7 per cent on the day, after posting its biggest daily percentage fall in 18 years on Tuesday.
"It is just impossible to put any realistic value to the rupee any more," said Uday Bhatt, a forex dealer with UCO Bank.
The need to attract foreign capital is critical for a country whose record high current account deficit is a key reason behind the rupee's slump. Yet policymakers have consistently struggled to come up with measures that can convince markets they can stabilise the currency and attract funds into the country.
That failure is becoming an increasing source of tension for India at a time when fears of a possible U.S.-led military strike against Syria are knocking down Asian markets, with prospect that the Federal Reserve will end its period of cheap money as early as next month further raising concerns.
In its latest initiative, the government late on Tuesday proposed setting up a task force to look into currency swap agreements, a measure analysts said could bring some relief if carried out in time by reducing market demand for dollars or other major currencies.
"Lets see what the authorities do, but if the government can come out with some really big currency swap arrangement with some countries, that can be a strong positive," Bhatt said.
The rupee has now fallen around 19 per cent so far this year, by far the biggest decliner among the Asian currencies tracked by Reuters.
Meanwhile, the Nifty fell more than 2 per cent while 10-year bonds yields rose to as high as 9.04 per cent.
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