STATESMAN NEWS SERVICE
Mumbai, 8 July
In one of its steepest fall, the partially convertible rupee crashed 97 paise against the American dollar in early morning deals today, sending panic waves across the currency and equity markets. In line with other Asian markets like Tokyo, Hong Kong or Shanghai, Dalal Street too suffered a huge sell-off with ever-depreciating rupee reviving fear of flight of capital from the equity markets. The foreign funds have already withdrawn between $6 and $8 billion since the start of May on macro-economic concerns threatening the domestic economy. 
The rupee, that had closed at 60.22 per dollar on Friday, today lost further ground ~ 39 paise ~ to end at 60.61 per US dollar after the central bank rushed in to meet the demand of dollar liquidity.
The rupee&’s sharp fall forced the Reserve Bank of India to step in to check the slide when it touched 61.15 per US dollar. The central bank prodded a select state-run banks to sell dollars as demand for the greenback from importers and oil marketing companies has been significantly high. 
The RBI also held separate talks with OMCs to understand their dollar requirements. The central bank is likely to assign State Bank of India the task of meeting OMCs’ dollar requirements at a special reference rate to quell the volatility in the currency market.
In the wake of today’s fall in the rupee and equities, brokerages, banks as well as dealers on inter-bank foreign exchange have renewed the demand for interest rate cut by the RBI to revive the faltering economy.
Meanwhile, in stock market, the S&P Bombay Stock Exchange Sensitive Index recovered from day’s low of 19,185.92 points (-309.90 points) to close at 19,324.77 points losing 171.05 points or 0.88 per cent. The CNX Nifty of the National Stock Exchange ended at 5,811.55 points, down 0.96 per cent or 56.35 points. 
The weak rupee and unattended current account deficit forced global brokerage firm Deutsche Bank to revise its Sensex target from 22,500 to 21,000 for 2013. In a fresh report today, it said: “Following five per cent depreciation of the Indian rupee in June and given continuing fear of abating global liquidity, currency stability has emerged as the overriding catalyst for the Indian equity market, and until the currency stabilises, we expect Indian equity market to stay highly volatile.”
Dealers on the inter-bank foreign exchange as well as stock market analysts point out the improved employment numbers in the USA is a clear signal that the Federal Reserve may advance withdrawal of QE (quantitative easing) to September from October-December 2013 quarter by suspending buying of government bonds. 
The Fed has been purchasing bonds worth $86 billion a month to help revival of economic growth. Such confidence inspiring developments have prompted foreign funds to withdraw from the emerging markets and return home. 
The biggest loser of this flight of equity capital is India since the domestic exchanges are over-dependent on foreign institutional investors to take the stock indices like the Sensex of the BSE or the Nifty of the NSE to dizzy heights.