Mumbai: In a highly volatile trading on Tuesday, stock markets dipped for the sixth day in a row even as the government sought to soothe investor nerves, saying that the Indian economy's strong fundamentals would help it survive chills of the global financial turmoil.

READ MORE: Sensex down 132 pts, closes at 16,858

The words of assurance helped arrest the market decline, triggered by debt crisis in the US and Europe, and stocks recovered smartly from their early morning lows. Initial positive cues from European markets also helped.

However, uncertainties in the global financial markets eventually prevailed over the market sentiments.

A see-saw trade was seen in the forex market as well, and the Indian rupee extended its losses for the sixth straight session on Tuesday. It fell another 23 paise to its lowest level in over 10 weeks of 45.20/21 against the American dollar.

Heavy capital outflows too put pressure on the rupee as Foreign Institutional Investors (FIIs) sold shares.

At the same time, gold continued to gain ground and moved closer to Rs 26,000-mark per 10 grams.

After opening 472 points down this morning, the Sensex widened its loss to 558 points within minutes. Thereafter, it recovered more than 700 points from early morning lows and was trading with a gain of over 100 points at one point of time. However, it soon turned negative with over 300-point loss and after partial recovery closed 132.27 points down at 16857.91 -- lowest level since June 9, 2010.

Amid all the market volatility, Finance Minister Pranab Mukherjee told reporters, referring to yesterday's Goldman Sachs report, "I would like to emphasis that some of the investment banks have upgraded India to market weight, that means the basic fundamentals are strong and macro-economy recovery is moving toward a positive direction."