Mumbai: The rupee slumped to a fresh record low on Monday, just 7 paise away from hitting 70 a dollar mark and equity markets closed lower as emerging markets weakened amid concern over the risk of contagion from Turkey’s financial-market turmoil.

The home currency ended at an all time low of 69.93 a dollar, down 1.56%—its steepest fall since 3 September 2013—from its previous close of 68.84. The rupee had opened at 69.49.

The currency fell by more than one full rupee since its last worst performance in September 2013, a year marked by unprecedented volatility in Indian markets.

“Contagion worries from Turkey’s currency crisis is spilling over to the Asian space, as it’s manifesting through a stronger dollar," said Radhika Rao economist at DBS Bank.

“Central banks, including the RBI (Reserve Bank of India), has built buffers in the past 2-3 years when flows were abundant and global policy rates were low. These are being put to test this year," Rao added.

The benchmark BSE Sensex closed 0.59%, or 224.33 points, lower at 37,644.90 points, while the National Stock Exchange’s 50-share Nifty slipped 0.65%, or 73.75 points, to close at 11,355.75.

The 30-share Sensex was dragged down by financial stocks, following a quarterly loss at India’s largest lender, State Bank of India, and the resignation of deputy managing director Paresh Sukhtankar at private lender HDFC Bank Ltd.

“We have been seeing a problem in the Indian economic set-up for a while. Though we had very good reforms progress, currently we are losing the tail wind of low oil prices. It’s a structural problem and adds to our current account deficit," said Dipen Sheth, head of institutional research at HDFC Securities. “Also, there is a knee-jerk reaction to the rout in global markets. Depreciating rupee could hurt our current account further."

Earlier in the day, the Indian rupee fell as much as 1.52% to hit a record low of 69.9 against the US dollar, worsening sentiments in the stock market.

“We need to wait and watch for how the market pans out for near-term direction. That said, there is no disputing that we are the fastest growing major economy, and over the long term, India remains a good story," he added.

Foreign institutional investors (FIIs) have pumped in a net of a amere $260 million into Indian equity markets so far this year, while domestic institutional investors have invested a net of 66,316.30 crore during the period.

In a note on Monday, Kotak Institutional Equities said Sukthankar was one of the founding members of HDFC Bank and his resignation puts end to speculation regarding his candidacy for the job of next managing director of the bank.

“We don’t see any near-term concerns to business, given the strength of the senior management team but it does appear that the successor is most likely an external candidate," Kotak said in the note, while maintaining its “reduce" rating on the stock.

HDFC Bank shares shed 1.15%, while mortgage lender Housing Development Finance Corp Ltd. dropped 1.48%.

Top lender SBI slumped 3.17% after it posted a loss for the third consecutive quarter, after setting aside funds to cover losses on its bond portfolio and increased gratuity.

The only saving grace for the equity market was flows into systematic investment plans (SIP) of mutual funds’ equity schemes. “The SIP inflows are a ray of hope, and that should cushion some of the losses in the market. Savings are getting financialized. Incrementally, more money is coming into markets," said Sheth of HDFC Securities.

Analysts are divided on how this Turkey crises will effect India. Analyst Soumyajit Niyogi, associate director, India Ratings and Research, expects that the current crises may trigger outflows from local equity and debt markets while Abhishek Gupta, economist from Bloomberg, believes it is unlikely to affect India.

“India today is far better prepared to cope with global shocks relative to 2013 during the taper tantrum, owing to multiple structural reforms that have made the domestic economy more resilient", said Gupta.

So far this year, the rupee has weakened 8.67%, while foreign investors have sold $200.10 million and $5.20 billion in the equity and debt markets, respectively.

Other emerging market currencies have also slumped.

Turkey’s lira posted its biggest weekly loss in more than 17 years.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 96.412, up 0.06% from its previous close of 96.357.

Bloomberg contributed to this story.

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