The rupee touched its all-time low at 54.51 against the U.S. dollar while equities continued their downward spiral recording a four-month low with a fall of 298.6 points or 1.83 per cent on the Bombay Stock Exchange.
The rupee closed at 54.49/50 against its Tuesday's close of 53.79.
The rupee's previous historical low was recorded in mid-December 2011 at 54.30 on eurozone debt crisis.
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The issue is looming large again as the European nations are scrambling to resolve debt issues of their member-nation, Greece, which is gearing up to face another election to end a stalemate. The fall was aided by domestic fiscal concerns, which brought down sentiment drastically in the financial markets.
The equity markets, too, faced a grim situation, on Wednesday, and the 30-share BSE sensitive index (Sensex) closed at 16030.09, a fall of 298.6 points or 1.83 per cent. It fell to 15974.60 intra-day, its lowest level in four months.
However, bargain-hunting saved the market from closing below the psychological 16000-mark.
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“The market will continue to remain bearish if rupee falls further. It all depends on how the Reserve Bank of India tides the rupee movement,” said Kishor P. Ostwal, CMD, CNI Research Ltd. “As of now, it seems the speculators have full control over the currency market,” said Mr. Ostwal adding, they might succeed in taking rupee to 55-56.” If the rupee bounces back, equity markets will bounce back very sharply. Possibly, “we can again see a dead cat bounce tomorrow [Thursday].”
The broad-based National Stock Exchange's 50-share Nifty closed at 4858.25, down by 84.55 points or 1.71 per cent. “Nifty may test 4950 support at 4820,” said Mr. Ostwal.
All sectoral indices ended in the red. Led by economic related stocks, metal lost 2.68 per cent, followed by automobile 2.59 per cent, consumer durables 1.94 per cent, capital goods 1.69 per cent, banks 1.65, power 1.64 per cent and PSUs 1.50 per cent. Stocks have tumbled 13 per cent since touching a 2012 peak in mid-February.
Equities plunged and the rupee hit a fresh record low as markets globally felt the tremors of the political upheaval in Greece, said Sanjeev Zarbade, Vice-President (Private Client Group Research), Kotak Securities.
“In the currency market, the rupee hit a new low, raising fears of more foreign investors cutting exposure to Indian shares,” he added.
Eurozone worries continued to impact global equities. A possible exit of Greece from the eurozone is resulting in rise in risk aversion. Capital is moving from risk assets to safe assets such as the U.S. dollar, thereby resulting in the dollar rallying against global currencies, said Mr. Zarbade.
“India has its own set of issues, including a decelerating economic growth and stubbornly high inflation.”
The recently concluded general elections in Greece gave a fractured verdict. Attempts to form a coalition government have failed due to differences between parties.