Mumbai, May 12: Disappointing industrial production numbers today dragged the rupee below 42 a dollar to a 13-month low of 42.06. The rupee has lost nearly 47 paise over its last close of 41.59.

Foreign exchange dealers said the weaker- than-expected industry figures reinforced pressure on the rupee on account of high crude oil prices and led to a panic buying of dollars along with short-covering.

“It is feared that a slowdown as evident from the index of industrial production (IIP) numbers could impact inflows,” an analyst with a private sector bank said. He said that the Indian currency would continue to remain under pressure over the near-term and might even breach the 42.5-mark, though much would depend on what the Reserve Bank of India did. Foreign institutional investors have been net sellers over the past few sessions and so far in this year, they have sold stocks close to $3 billion.

The sharp fall in rupee’s value came after a quiet start. It resumed lower at 41.64 a dollar against last Friday's close of 41.59 and moved down further to 41.64 in late morning deals. Oil refiners and some importers were seen buying dollar in the wake of rising crude oil prices.

Analysts said exporters had been seen holding back on dollar sales, on expectation that the Indian currency might weaken further.

IIP numbers also had its impact on the stock markets which displayed see-saw movement today.

After opening on a weak note in the morning, the sensex dropped about 190 points, but as the European markets opened with gains on resilient HSBC quarterly figures, the index recouped momentum and ended 123.83 points up at 16860.90.

IT stocks recovered the most from their day’s losses, closing 1.48 per cent higher on the Bombay Stock Exchange as the dollar gained strength vis-a-vis the rupee. Anand Tandon, head of research, Brics Securities, told The Telegraph, “The sentiments were weak in the morning, but as the European stocks displayed strength, the markets took a cue and managed to recover their losses. Given the fact that the market today survived losses on the face of slackened trend of industrial growth numbers, a lot will now depend on the forthcoming inflation figures. If inflation comes down, the market will definitely gain a trigger.’’

He said the IIP numbers might affect the market sentiments gradually. “Going by the current figures, it can be said that the cost of doing business in such an economy has gone up, which in turn could lower profitability.”

The market breadth was, however, negative as 1,777 stocks ended with losses, while 920 finished with gains. Trading volumes declined further to Rs 6,007 crore from Rs 6,606.18 crore last Friday.