"We continue to believe that fundamentally the rupee is undervalued and has overshot its equilibrium level substantially, but as numerous episodes of past currency crises have amply demonstrated, under a scenario of deep pessimism, currencies can overshoot substantially and remain so for a long time," economists at the bank wrote in the report.

"India, we fear, is entering such a zone". The partially convertible rupee dropped to a record low of 64.13 per dollar on Tuesday and was trading at 63.38/42 on Wednesday, weaker than its close of 63.25/26.

(Agencies)

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