The rupee dropped to a record low of 73.42 on Wednesday as a sharp rise in global crude oil prices heaped more pressure on the currency, prompting the central bank to quickly intervene to slow its fall.
The partially convertible rupee hit 73.42 per dollar, an all-time low, and sharply lower than its previous close of 72.91. The domestic unit hovered in a range of 73.42 and 72.90 before ending at 73.34, down 43 paise at 5 pm local time.
The Reserve Bank of India stepped into the market to sell dollars, helping the rupee retrace to as much as 72.90 to the dollar. The benchmark 10-year bond yield was up 7 basis points at 8.06 per cent.
“The pace of fall in the rupee starts to accelerate as the depreciation matures,” said Anindya Banerjee, deputy vice president, currency derivatives at Kotak Securities. “The RBI is intervening more in the currency derivatives market through forwards and futures than in the spot market.”
The S&P BSE Sensex nosedived 550.51 points or 1.51 per cent to 35,975.63 and the Nifty dropped 150.05 points or 1.36 per cent to 10,858.25 on heavy selling in auto, TECk, IT and banking stocks. Intraday, the Sensex hit a low of 35,911.82 and the Nifty touched 10,843.75.
Oil prices have firmed on expectations of tighter supply once US sanctions start targeting Iran's petroleum industry from next month. Though a strong dollar and rising US crude supply are curbing gains, prices are hovering at the highest levels since November 2014.
In India, the world's third-largest oil importer, its currency plunge has meant oil prices have risen nearly 50 per cent in rupee terms this year.
Other emerging currencies also weakened while the dollar index was at 95.334 after scaling 95.744 overnight, its highest since September 4.
India's central bank is widely expected to raise its policy repo rate at a review on Friday in a bid to slow the rupee's decline and rein in inflationary pressures.