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Historically, a steep fall in the rupee has been attributed to, in good measure, to FIIs pulling out money in droves from the domestic equity markets.
The linkage between FII flows and the rupee's movement though seems to have been tenuous in 2011. In the current calendar year, the net FII outflow has been only mildly negative ($209 million till December 12), yet the rupee fell by as much as 18 per cent against the dollar.
In 2008, the last occasion when the rupee went into a free fall (down 24 per cent against the US dollar), FIIs had pulled out as much as Rs 13,000 crore. This raises the question as to which are the other factors which have dragged down the rupee this time around.
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