(Reuters) – The BSE Sensex slumped over 3 percent on Tuesday, giving up nearly all its gains over the previous three sessions, as blue chips including HDFC plunged on worries the passage of a food security bill would worsen the country’s fiscal deficit.

The falls were accentuated as the rupee plunged to a record low of 66.30 to the dollar as the 1.35-trillion-rupee bill providing subsidised grains passed by the lower house of parliament on Monday renewed doubts about the government’s resolve to control spending ahead of elections due next year.

The slump in both shares and the currency also comes after overseas investors have sold about $810 million worth of shares in the previous seven sessions through Monday, with global sentiment weakening further amid uncertainty about the prospect of military action against the Syrian government.

The weak appetite for risk also eclipsed an announcement by Finance Minister P. Chidambaram that the government had approved infrastructure projects worth 1.83 trillion rupees, a step aimed at reviving economic growth and shoring up investor confidence.

Analysts were sceptical about India’s ability to attract funds for infrastructure projects in an economy growing at a decade-low of 5 percent.

“There is negative sentiment for emerging markets and government has to take very strong steps at ground level which have been missing so far,” said Navneet Munot, chief investment officer at SBI Mutual Fund.

The benchmark BSE Sensex slumped 3.18 percent, or 590.05 points, to close at 17,968.08, ending its three-day gaining streak.

The broader Nifty fell 3.45 percent, or 189.05 points, to end at 5,287.45, closing below the psychologically important 5,300 level.

A road sign is seen next to Bombay Stock Exchange (BSE) building in Mumbai August 22, 2013. REUTERS-Danish SiddiquiBlue-chips led the decliners, with Housing Development Finance Corp Ltd (HDFC.NS) ending down 7.8 percent, while ITC Ltd (ITC.NS) lost 3.1 percent.

NSE bank index slumped 5.4 percent to mark its lowest close since January 2012 on continued worries over slowing growth and dimming prospects of RBI reversing its liquidity tightening measures any time soon as the rupee continue to make record lows.

HDFC Bank Ltd (HDBK.NS) plunged 8.1 percent while ICICI Bank Ltd (ICBK.NS) ended 3.4 percent lower.

IDFC Ltd (IDFC.NS) slumped 16.5 percent, adding to Monday’s 8.7 percent fall, after the Reserve Bank of India on Friday cut the limit that foreign investors can own in the infrastructure lender to 54 percent from 74 percent without giving a reason.

Oil and Natural Gas Corp (ONGC.NS) fell 3.3 percent, marking a fall of 6.3 percent in two days after it agreed to buy 10 percent in a gas field offshore Mozambique from Anadarko Petroleum Corp for $2.64 billion.

However, among stocks that gained, Dr. Reddy’s Laboratories Ltd (REDY.NS) rose 0.8 percent, clocking a fourth day of gains after the company said on Thursday it had launched a key generic drug which has sales of $194 million in the U.S.