In fact, not only the Indian rupee, but the Indonesian Rupiah, Turkish Lira and the South African Rand all came tumbling down.

The Federal Reserve will after its 2-day meeting, decide on whether it should taper its QE3 Programme, or what they call asset purchases programme in the US.

The US Federal Reserve has been buying assets worth $85 billion each month, which actually means pumping money into the US economy to help sustain growth. Now, a lot of this money finds its way into emerging market equities and India has received large amounts of money into its equity markets. Now, if this liquidity dries up with the Fed deciding to taper off its QE3 programme, Indian markets could fall.

Now, much would depend on the size of the taper. If, it reduces the bond purchases by around $10-15 billion each month, it would not have much of an impact on the markets, because this has been factored by the markets. But, any amount more than that could see the markets being whacked and the Indian rupee dropping.

Clearly, it's something that the market cannot predict at the moment, but anything in excess of $15 billion taper would be a surprise. On September 20, the RBI will deliver its monetary policy review, for the first time under new Governor Raghuram Rajan.

It's widely expected that the new Governor would hold policy rates in a move to battle the rupee. It would be interesting to see the tone of the RBI message and what it decides to battle. It has to decide whether it has to battle the rupee, growth or inflation.

The next week is likely to be volatile. Invest only if you have the stomach for volatility.

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