Invest Smart and Gain from the Falling Rupee

The rupee staged a sharp recovery of about 10% in September. In August, the Indian currency plummeted almost 20% against major global currencies. It also breached

Look beyond the Indian Peripheries

the psychological level of 69 per dollar. Despite strengthening of the rupee, most FIIs cast a grim outlook on the rupee. The rupee roller coaster ride can be unnerving especially for the consumers. 

Many of us nurture financial dreams and build a corpus to fund our overseas travel and or kids’ education abroad. This rupee corpus is later converted and utilized to meet these goals. But overseas travel, foreign education, imported goods and services, to name a few, become expensive when the rupee depreciates. You simply have to more rupees for the same amount of dollar whenever the rupee weakens.  

How can you mitigate this impact? Add some assets in your portfolio, which either brings dollar income or invest in international markets. Here are some options:

IT & Pharma Stocks 

IT and Pharma companies build their revenue stream on exports. This revenue is typically in international currency such as the US $, Euro, GBP etc.

In a falling rupee scenario, these figures when converted into rupees, would give an additional valuation. Thus IT and Pharma sector stocks could help you hedge your investment portfolio from rupee depreciation. Do an analysis of the key parameters such as profitability ratios, fundamental analysis, sector/industry trends and the company’s performance vis-à-vis its peers. 

If you are not comfortable buying a single stock, you can consider investing in mutual funds that focus on IT and Pharma. 

Feeder Funds

You can invest in global markets through mutual funds. It adds a diversification to your portfolio and could be a good way to hedge against weak rupee.  For instance if you had invested Rs 50,000 when the dollar rupee was 50, you would have invested $1000. Today if the rupee has weakened to 65 per dollar, your investment in rupee terms would be Rs 65,000. This simply means you have earned a return of 30% on due to devaluation in rupee.