The hint from the world's largest central bank spooked overseas investors and they started pulling out their investments from the Indian market.
FIIs pulled out over USD 14 billion from India's debt market and over USD 3 billion from equities between May end and August end.
The rupee started making smart recovery after new RBI Governor Raghuram Rajan took charge on September 4.
One major step in the pre-Rajan era was on August 28, when the then Governor D Subbarao opened a special forex swap window to meet oil companies' daily dollar requirements. This was meant to contain volatility in the forex market.
On assuming charge, Rajan announced a slew of measures like enhancing limit to re-book cancelled forward exchange contracts, opening of a swap window to collect more FCNR-B dollar funds, among others, to boost the local currency.
Higher inflows from overseas investors also helped the rupee rise from its historic low.
Marketmen and analysts have attributed the strength of the rupee, apart from improving macro-fundamentals like lower fiscal deficit (4.6%), a lower CAD (sub-2%), to expectations of a stable government after the Lok Sabha polls.
