The rupee fell 1 paisa to close at an all-time low of 83.72 (provisional) against the US dollar on Thursday, dragged down by demand for the American currency in the overseas market and significant foreign fund outflows.

Forex traders said the fall in domestic unit came on the heels of a significant downturn in the Indian equity markets, sparked by the government's decision to hike the tax rate on capital gains.

At the interbank foreign exchange market, the local unit opened at 83.72 and touched an intra-day high of 83.66 and a low of 83.72 against the dollar during the session.

It finally settled at an all-time low level of 83.72 (provisional) against the American currency, down 1 paisa from its previous close.

On Wednesday, the rupee depreciated 2 paise to hit its all-time closing low of 83.71 against the US dollar.

The local unit appreciated slightly during the intra-day trade on supposed intervention by the Reserve Bank of India (RBI) and overall weakness in crude oil prices, said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.

"We expect the rupee to trade with a slight negative bias on weak global markets and fresh FII outflows. However, weak US dollar and declining crude oil prices may support the rupee at lower levels. intervention by the Reserve Bank may also support the rupee," Choudhary added.

The government's decision to hike the tax rate on capital gains dampened market sentiment, exerting immense pressure on the rupee and the equity market.

In the domestic equity market, the 30-share BSE Sensex fell 109.08 points, or 0.14 per cent, to settle at 80,039.80 points, and Nifty dropped 7.40 points, or 0.03 per cent, to 24,406.10 points.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 104.17, lower by 0.21 per cent.

Brent crude futures, the global oil benchmark, fell 1.79 per cent to USD 81.25 per barrel.

Foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 5,130.90 crore, according to exchange data.

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