The Indian rupee slipped below the psychological level of 66 against the US dollar on Tuesday and the capital markets saw heavy selling by foreign funds as the government admitted there were domestic factors behind the currency crisis. The partially convertible rupee slumped to a new record low of 66.07 against the dollar at the Interbank Foreign Exchange Market in Mumbai, surpassing the previous record low of 65.56 recorded on August 22. The Indian currency later recovered to 65.92 against the dollar in afternoon. The free fall in rupee led to heavy selling pressure in the equities markets. The 30-share Sensex of the Bombay Stock Exchange, which opened at 18,460.72 points, traded at 17,948.43 points around 3 pm, down 609.70 points, or 3.29 per cent, from the previous day's close at 18,558.13 points. This is the second time the Sensex traded below the 18,000-mark. The index touched a high of 18,460.72 points and a low of 17,925.11 points during trade so far. The wider 50-scrip Nifty of the National Stock Exchange (NSE) was also trading down by 194.10 points, or 3.54 per cent, at 5,282.40 points. Earlier in the day, Finance Minister P Chidambaram told the Rajya Sabha that the rupee had overshot its true value but expressed confidence that it will find its appropriate level. "There are not just external factors, there are also domestic factors. We recognise there are domestic factors," he said. "One of the domestic factors is that we allowed the fiscal deficit to be breached and we allowed current account deficit to swell because of certain decisions that we took during the period 2009 to 2011." The free fall in rupee value and market capital also came even as the Cabinet Committee on Investment (CCI) cleared three dozen projects worth Rs 1.83 lakh crore. Regarding the decisions, Chidambaram said: "The message that we are sending, we are very keen to get investment cycle restarted."

Source