Stock markets which were trading higher dropped sharply following reports of the rupee downfall, as foreign funds turned sellers agressively. Dealers say there maybe more damage to come in the rupee, though there could now be interventions by the Reserve Bank of India later this week.
For the last few days the Indian rupee has been managing to hold ground without falling below the physcological 60 mark. Today's drop below the 60 levels was sharp and swift, thanks to deteriorating economic fundamentals, including the trade and current account deficit.
Dealers say that there maybe some recovery in the first week of July as dollars from a stake by Hindustan Unilever may help recovery. However, if the relentless selling by foreign funds continues in the Indian debt and stock markets there maybe fresh dollar outflows.
Stock markets might open sharply lower on Thursday following the rupee debacle, as it is also is the last day of expiry of options and futures.