Indian rupee on Thursday plummeted to 61.93 and closed 42 paise down at over seven-month low of 61.83 against the greenback on heavy capital outflows and a spike in demand for US dollars.
The dollar index was up by a whopping 0.45 per cent against basket of six major global rivals, which also pushed the rupee to log its biggest daily loss since September 15.
A widening trade deficit that hit a 18-month high in September was also among the factors that led to rupee depreciation.
At the Interbank Foreign Exchange market, the local unit commenced lower at 61.56 and attempted a recovery to touch a high of 61.43.
However, it fell back to a low of 61.93 and closed at 61.83, logging a loss of 42 paise or 0.68
"Demand for dollars from importers weakened rupee. Speculation amongst traders that a big defence payment is due in November that could reduce reserves also weakened the currency," said Suresh Nair, Director, Admisi Forex India Pvt Ltd.
The Indian benchmark S&P BSE Sensex today closed sharply down by 349.99 points, or 1.33 per cent to end below 26K-mark for the first time after two months.
Overseas investors, acoording to provisional data, sold equities worth over Rs 1,100 crore (Rs 11 billion) after about Rs 700-crore (Rs 7-billion) sell-off on Tuesday.
Pramit Brahmbhatt, Veracity Group CEO, said: "Rupee traded weak today taking cues from weak local equities and strong dollar."