The rupee on Thursday tumbled by 86 paise or 1.16 per cent -- its biggest single-day fall in past six months -- to settle at a lifetime low of 75.12 against the US currency due to heavy forex outflows by risk-averse investors.
A strengthening US dollar in global markets and rebound in crude oil prices weighed on the rupee sentiment, analysts said.
The local currency has tanked close to 4 per cent this month as foreign investors withdrew around Rs 1 lakh crore from Indian debt and equity markets in March so far.
Traders said there is a sense of anxiety among investors as they see the global as well as domestic economy plunging into a deep crisis due to the coronavirus-driven shutdowns. The pandemic has killed more than 9,000 and sickened lakhs of people around the globe.
At the inter-bank foreign exchange market, the local currency opened lower at 74.96 and slid further below the record 75 mark. During the day, it touched lifetime trading low of 75.30 against the American currency.
The domestic unit finally settled at 75.12 against the greenback, down 86 paise, its steepest single-day plunge since September 3, 2019.
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"India's rupee weakened to a new record low on foreign fund outflows from domestic equity and debt market. Global meltdown in risk assets seen with rising number of coronavirus cases is adding to anxiety," said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.
Sharma further said that foreign investors have pulled a combined USD 10 billion from Indian shares and debt so far this month, the biggest withdrawal since the US taper tantrum of 2013.
Experts believe a relief rally in rupee is likely on expectation of central bank intervention at record low levels and Forex swap.
"RBI provided USD 2 billion of dollar liquidity via a forex swap on March 23 which could give temporary relief. However, the trend for remains bearish could test the level of 76.20 in coming weeks," Sharma said.
The dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 1.10 per cent to 102.27.
"The considerable amount of outflows from the Indian equity and debt markets over the past few sessions suggest that investors are exiting all assets classes and chasing dollar due to the coronavirus scare, where it has soared to highs seen since March 2017," said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.
The 10-year government bond yield was at 6.41 per cent.
Global crude oil benchmark Brent rose 4.50 per cent to USD 26.00 per barrel amid concerns over global growth.
On the domestic equity market front, the BSE barometer Sensex settled 581.28 points or 2.01 per cent lower at 28,288.23. It swung over 2,656.07 points through the session. Similarly, the NSE Nifty settled 205.35 points, or 2.42 per cent, down at 8,263.45, after dropping below the 7,900 level intra-day.
Foreign institutional investors sold equities worth Rs 5,085.35 crore on a net basis on Wednesday, according to provisional exchange data.
"Going ahead, the domestic currency is likely to face more heat and can slip lower towards 77-77.50 in near-term, considering the risk appetite in global markets is unlikely to resume soon as investors increasingly brace for a global recession," Sachdeva said.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 74.1727 and for rupee/euro at 81.7210. The reference rate for rupee/British pound was fixed at 89.7594 and for rupee/100 Japanese yen at 69.39.
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