The rupee sank to a new record low of 68.75 against the U.S. dollar while gold prices touched its all-time high on Wednesday.
The benchmark Sensex toppled by 457 points or 2.54 percent to 17,510.89 this morning.
The continual decline of the rupee is due to the persistent dollar demand from banks and importers due to further fall in the equity market amidst the appreciation of crude oil prices.
On Wednesday, oil prices rose in Asian trade on concerns over possible U.S. military action against Syria, after Washington warned President Bashar al-Assad's regime that it would face action over an alleged chemical weapons attack.
Forex dealers have said that the persistent capital outflows by foreign funds also contributed to the rupee value against the dollar.
Foreign Institutional Investors (FIIs) sold shares worth a net Rs. 1,373.99 crore yesterday, as per the provisional data from stock exchanges.
The SandP BSE benchmark Sensex plunged further by 473 points in the late morning trade because of persistent selling pressure, triggered by a sharp fall in the value of the rupee against the dollar and the sustained capital outflows by foreign funds.
Shares of Banking, Refinery, PSU, Realty, Captial Goods, FMCG, Power, Auto and Metal declined on heavy selling.
The Sensex resumed lower at 17,851.44 and dropped further to a low of 17,448.71 before quoting at 17,494.80 at 1040 hrs, showing a loss of 473.28 points or 2.63 per cent from its last close.
The NSE 50-share Nifty also tumbled by 144.15 points or 2.73 per cent to 5,143.30 at 1040 hrs.
Additionally, continuing its appreciating trend, gold prices climbed to cross Rs. 34,500 per 10 gram level for the first time ever in futures trade on Wednesday.
At the Multi Commodity Exchange, gold for delivery in October went up by Rs. 531, or 1.57 percent to trade at an all-time high of Rs 34,246 per 10 gram in a business turnover of 1,624 lots.
Similarly, the metal for delivery in the far-month December surged by Rs 511, or 1.52 per cent yellow, to Rs 34,161 per 10 gm in 505 lots.
Market analysts attributed rise in gold prices at futures trade to the depreciating value of the rupee, making the dollar-quoted precious metal expensive.
On Tuesday, Finance Minister P. Chidambaram said there is need to "be patient and firm" and the government is doing what is required to be done.
"Rupee will find its appropriate value," he added.
The government is considering currency swaps to bolster the reserves, but currency experts said the move is unlikely to help.
