While selling pressure is unlikely, the market expects FIIs to slow down their current investments till the rupee stabilises. ``I don't expect FIIs to sell because the rupee is weak. But, rupee could be weak because FIIs are not buying. They have been supporting the rupee strongly in the last two months,'' says Simon Holdsworth at ITC-Threadneedle. In fact, a weakening rupee is being seen augmenting the bottomline of companies who earn a bulk of their earnings from exports. ``Many FIIs look at a modestly weaker rupee as a positive sign for Indian companies and so far, the fall has not reached an alarming proportion,'' adds Holdsworth.

Concurs Gul Tekchandani, CIO of Sun F&C Mutual Fund, ``there are no indications of the FIIs pulling out from the country and webelieve that this will not escalate into something bigger as the economy is improving and there is a positive undertone. The rupee on an average depreciates in the range of 5-8 per cent per annum and the depreciation today is only a part of that which FIIs have already factored in while making allocations.''

``India is underweight in most of the emerging market portfolios and offers some of the cheapest valuations. This will prevent the FIIs from pulling out. The depreciation in rupee is only a blip,'' says Tekchandani. Adds the CEO of another FII, ``Till June, the rupee had depreciated by 4 per cent for the current year and this was regular with FIIs who provide for about an 8 per cent depreciation when they invest.''

A section of the market believes that Tuesday's fall was largely on account of speculative activity by banks, which should be curbed by RBI on Wednesday.

``There was was hardly any demand from corporates on Tuesday. There is speculative interest building in the rupee and if the RBI doesnot intervene, the rupee is likely to go for a toss. This will force corporates to rush for cover as they may not be comfortable with rupee at, say, 43.50, leading to a chain-reaction. This is where FIIs, who are mere investors in the Indian market, press the panic button. Further, with other funds on sidelines, there may be absence of investors to support a falling market,'' says a fund manager.

Adds Rajan Govil, Chief Economist (India), HSBC Securities, ``In the short-term, it will be wait and watch for FIIs till the rupee stabilises which will result in lower inflows. FIIs may buy in stocks which have substantial exports as their profitability will go up.''