India’s rupee hit an all-time low of 64.11 against the U.S. dollar on Tuesday owing to an anticipated withdrawal of the U.S. Federal Reserve’s bond-buying program. The possible withdrawal and the weakening of currency sent India’s financial markets on a roller-coaster ride, with Bombay Stock Exchange’s S&P BSE Sensex index losing 1.9 percent.

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Some recovery in rupee helped the markets

However, after opening sharply lower for a third straight session, markets recovered some of the losses before the end of the trading day.

During the trading session, there were speculations that some of the Indian banks are booking profits by selling dollars, which further weakened the rupee, says a report from The Wall Street Journal. Indian rupee closed at 63.13 for a dollar on Monday compared to 63.25 late Tuesday.

The recovery in the value of rupee, during the day, did help the financial markets as the Benchmark Sensex closed 0.3 percent lower at 18246.04 points.

Rupee may slide further

However, analysts are of the opinion that the rupee may further deteriorate as investors are not very optimistic on Indian economy and currency, presently.

On Tuesday, JPMorgan Chase & Co (NYSE:JPM) lowered its outlook on India equities from Buy to Neutral or Hold, citing weakening currency, which may impact India’s growth numbers.

“If the rupee continues to slide, then India will continue to underperform,” it wrote in a research note.

A report from Citi Research by analysts Aditya Narain and Jitender Tokas has lowered its Sensex target for December end from 20,800 to 18900, citing increasing uncertainty in a number of areas like monetary/currency policy, economic/investment revival, earnings, flows and elections.

Since the start of May, the Indian rupee has depreciated almost 15 percent against the U.S. dollar. The weakening currency reflects fears among the investors that India might not be able to limit its current-account deficit when developed economies curtail their easy-money policies. To protect the rupee from deteriorating further, India’s central bank is expected to keep interest rates high, which may further slow down the economy.

India has rebounded from similar levels before

However, some of the analysts are optimistic and believe the country will bounce back as it has done in the past. Moody’s Investors Service had maintained a stable outlook for India’s investment-grade rating. According to the rating firm, its credit rating includes the challenges facing Indian economy like high fiscal deficit, inflationary pressures and policy uncertainty.

Citi analysts also believe that India could rebound as it has been in similar situations before also. India has previously bounced back from the following crises: currency (2002), fiscal deficit (2003-08) and inflation (2001-03), asset quality (1999-07), tech bubble (2002), retail credit (2009) and the recent telecom crisis(2012). According to the analysts, India requires a “policy/bottom-up pullback, some luck and time, and don’t write it off.”