As the Indian rupee fell below the 68-mark and global agencies painted a gloomy outlook for the economy, the government today sought to reassure investors by saying there was no need for panic as the decline in the domestic currency was a reflection of "irrational sentiment."
"There is no need to panic. The Indian economy is strong and we will turn it around," Commerce and Industry Minister Anand Sharma said.
While the rupee fell 256 paise to close at a record low of 68.80 to a dollar, Standard & Poor's cautioned that the road ahead for countries with large deficits, including India, is "rocky in the near term."
The rupee dropped today as oil prices rose in Asian trade on concerns over possible military action against Syria, adding to concerns about the current account deficit and capital outflows.
Trying to assuage investors, Economic Affairs Arvind Mayaram said: "This is an irrational sentiment. It will correct itself. It is important to stay on the course. There is no need to panic."
The rupee has plummeted over 20 per cent since April. The mayhem in the currency market was extended to equities, with the S&P BSE Sensex declining 9 per cent in the past month.
As dark clouds loomed over the economy, French financial services major BNP Paribas lowered its growth forecast for India to 3.7 per cent from 5.2 per cent earlier, saying the situation was fast approaching a crisis proportion.
Reflecting the uncertainty in the economy, gold prices jumped by a record Rs 2,500 to Rs 34,500 per 10 grams.
A worried Finance Minister P Chidambaram yesterday had said the rupee is undervalued and came out with a 10-point action plan to revive the economy, which included promoting exports, encouraging manufacturing and reducing the fiscal deficit and CAD.
Singapore-based DBS Bank said: "The string of recent policy action might only help to manage the pace of depreciation and limit volatility rather than reverse the course of the currency.
"The effort to effectively defend the currency is turning into a losing battle in this environment."
Seeking to reassure