For the past 1 year, Rupee has been fluctuating and fallen heavily against the US Dollar. The rupee is currently trading at Rs 58 / Dollar. Several predictors still feel that this fall may not end now. Downtrend may continue for some more time. As an investor do not think that you would not get impacted with such fall. Also there are a few best investment options which you can encash with such fall in Rupee.
Why Rupee is falling against US Dollar?
There are several reasons for as to why rupee is falling against Dollar. Rupee hits 11 month low in the last 1 year against US Dollar. Below are the major incidents in the last one year which has impacted for such fall.
- Foreign Institutional Investors (FII’s) took away $ 90 Mn from stock markets.
- RBI Poor inflation outlook
- GDP has fallen to 10 years low in the year ended Mar-2013. Poor performance of farming, manufacturing, mining sectors has led this low growth. GDP has slowed down to 4.8% for the period Jan-2013 to Mar-2013.
- As per forex dealers, dollar demand related to defense payments and month end imports also impacted such fall in rupee value.
Also Read: S&P warning downgrade India rating-How an investor would get impacted?
What is the impact of such Rupee depreciation for Indian markets?
Companies which have foreign debts would have to pay high interest rate as the currency payment would be in dollars. Also the repayment of such foreign debt would unnecessarily increase the value of debt. If a company as taken $ 100,000 earlier say at Rs 54 per dollar. Now they need to pay back this $ 100,000 @ 58 per dollar. Means, they need to pay higher amount due to such fall in rupee.
Oil companies import up to 70% of oil from other countries. Due to deprecation of rupee value, they need to impact the same quantity with higher price. Due to this, either they would incur losses or Government can increase the fuel prices. This would increase the inflation.
You should stay away from companies which are dealing in huge foreign debts or Oil companies under current situation.
Who would get benefitted when rupee is depreciating?
Also read: 10 wealth building strategies in fast changing world
Invest in companies which are exporting: Companies which export are going to benefit with such fall in rupee. Means, companies like Information Technology (IT) or Textile companies which get majority of their revenues through exports are going to benefit. E.g. IT Company like TCS would get benefitted as the majority of the revenues are coming through its exports. While it would continue to do same business value, the dollars which are received would get converted into Indian banks at a high rate of @ 58 per dollar instead of Rs 54 per dollar which was there few months back. So you should invest in best IT companies and good Textile companies to gain in such scenario.
NRI’s would get benefitted: NRI would get benefitted from such fall in rupee value against dollar. NRI’s who are earning in dollars can get more rupees in India and they can further invest in Indian markets or Bank FD or any other saving options.
If you enjoyed this article, share this with your friends and colleagues through Facebook and twitter.
Why Rupee is falling against Dollar
- 5 Mutual Funds with Consistent Positive Returns in 9 out of 12 Months - June 8, 2023
- How to Use Credit Cards to Improve Credit Score? - June 7, 2023
- 11 Genuine Ways to Make Money in Free Time (Online + Offline) - June 5, 2023
One more thing u have written very few investment articles for NRI to look for investment in india. A few more in this area can be very useful. I have recommended ur website to few of my friends. I think u know wht u are writing. Keep going and wish u best of luck.
Sure Uday, will do that in coming weeks.
Can u please tell us how long it can go down. I mean its at the lowest level at the moment and how much time it can take to bounce back.
Ha ha, Uday, I am not a finance minister nor RBI head who can take steps and say it may get stop at some place. It would depend on several factors indicated in the article. Hopefully, it should stagnate at current level.
Well suresh u have written an article about standard and poor rating on 29th may in which u have mentioned it shd go down and it did. What indicators one shd look at to see its going up? What factors or news one shd look at for its rise?
I would put-up an article to that in next 1-2 weeks