By 10:20 a.m., the partially convertible rupee was at 48.79/80 per dollar compared with Wednesday's close of 48.525/540. It had recovered from a fall to 49.05 in early deals, at which it was down 1.1 per cent on the day.

It hit a record low of 49.30 last week.

"There are no inflows coming in to the market, the stocks are expected to be negative through the day, so the rupee opened with a gap," said the chief dealer with a state-run bank.

"There is also some non-deliverable forward related dollar demand in the market," he added.

Indian shares fell nearly 6 per cent to their lowest since July 2006 in early trade, following plunges in overseas markets. They later pared their fall to around 4 per cent.

Offshore one-month non-deliverable forward contracts were quoting at 49.84/99 per dollar, 1.9 per cent weaker than the onshore spot rate.

Two dealers said the state-run banks were seen selling dollars above 49 rupees, holding the local unit just below that mark. They also said Wednesday evening's cut in cash reserve requirements for banks would provide more room for the central bank to intervene to support the rupee.

Central bank intervention and tight liquidity conditions in the domestic money market had pushed overnight cash rates to more than 19-month highs of 23 per cent last week, but rates have eased since then due to central bank measures.

The central bank last week cut the banks' cash reserve ratio by 150 basis to 7.5 per cent with effect from Oct. 11, and on Wednesday said it was further cutting it by another 100 basis points to 6.5 per cent effective immediately.

The two cuts put together have released 1 trillion rupees ($20.5 billion) into the system.