How to Protect yourself against the rupee's fall ? Impact of Falling rupee on Investors, Common Man

Impact of Falling Rupee Fundamentals............

1. With the rupee hitting a new low almost every other day, 

Indians are likely to face a lot of pressure on their household 

budgets.

2. For starters, imports get costlier as we pay more for 

products such as oil, gold, fertilisers, machines, personal 

computers and mobiles, among others.

3. Your wallet will also shrink if you are planning a foreign 

tour or thinking of taking up educational courses abroad as 

these will be more expensive in Indian rupees.

4. Major imported things like Gold, Crude Oil, Food Items, 

Capital Goods, Machinery will cost you more.

5. Companies who have to pay international loans, will suffer 

loss because they need to pay more rupees to buy dollar to 

repay.

6. A depreciating rupee makes imports of component, capital 

goods and raw materials more expensive. As inputs and 

other equipment that are imported get costlier, margins get 

reduced to that extent. Companies with a high import 

component and those with foreign currency borrowings may 

be marked down in the stock market as the rupee 

depreciates.

7. Products that are directly imported, such as crude oil, 

fertilisers, pharmaceutical products, ores and metals, or use 

imported components such as Personal Computers and 

laptops, become more expensive following rupee 

depreciation.

A major chunk of the components in computers, viz., 

processor, hard disk drive and motherboard, is imported. 

Products such as mouse, keyboard and monitor would also 

witness a discernible impact on their prices on account of 

rupee depreciation. As the input costs increase, inflation may 

rise in the economy.

Depreciating rupee thus has an adverse impact on the 

inflation in the Indian economy, which is currently a major 

cause of concern for the RBI and the Industry alike.

To summarise, a falling rupee hurts you in the following way:

1. Prices of products -  especially oil – could go up hurting your wallet.
2. Investments in companies with foreign borrowings or which are exposed to currency fluctuations due to their business models can suffer.

How to protect ?

So, how can you protect against the falling rupee? For Indian 

residents, ensure you have at least some exposure to 

overseas assets like mutual funds. Over the last few years, a 

host of feeder funds and international index-based exchange 

traded funds have made their debut in India. Depending on 

the outlook for some these countries, investors could do well 

to take an exposure to these funds. A host of these 

international funds have a minimum investment of just 

around Rs 5,000.

Diversify your stock holdings, too. If you have companies 

that are largely export-oriented in your portfolio, you could 

take advantage of a falling rupee as these companies begin 

to report higher profits and thus see an increase in their 

market value.