By SHEFALI ANAND
The rupee's losses continued Monday, as it breached 52 to the dollar.
With this, it has lost a little more
than 16% of its value against the dollar so far this year. This is bad
news for the Indian economy broadly because we import more than we
export, and a lower rupee means that India has to pay more for the same
goods and services.
On an individual level, however, the rupee's losses can be good for
some and bad for others – depending on the situation. Here's a look at
the various effects:
Non-Resident and returning Indians: If
you live and earn money outside India but send some of it back home to
your family, this is a great time to remit a large portion.
The rupee has fallen not only against the dollar but also against most other major currencies.
One euro can get you 70 rupees now, which is 16.5% more than what it did at the beginning of this year.
The British pound brings 81.40 rupees now, up nearly 17%, and the
Australian dollar can get you 51.47 rupees, 12.5% higher than the start
of this year. The Kuwaiti dinar is worth nearly 17% more at 187 rupees
for every dinar.
If you have been earning in one of these countries and plan to return
to India to settle down, this is a good time to convert a large portion
of your foreign currency savings into rupees.
But non-resident Indians investing in India have to be cautious.
Investors into Indian stocks have to keep in mind that the benchmark
stock index Sensex has also been battered and is down 20% so far this
year. It can easily go lower from here, given the pessimism over the
Indian economy.
If you have a healthy risk appetite, you could bet that in a few
years the Sensex and the rupee both are headed higher, which could
result in twice the gains for you. But if the rupee weakens, it could
wipe out any market gains.
"It's a gamble," says Devang Shah, founder of Right Returns Financial
Planning in Mumbai. Mr. Shah advises sticking to your targeted asset
allocation, and not jumping into Indian stocks just because the rupee is
cheap.
Some long-term investors into India are simply happy to get more for
their dollar. Indian-American entrepreneur Sabeer Bhatia, who co-founded
the email service Hotmail, routinely remits money to fund research and
development at two start-up companies in India. The jump from 45 rupees
to nearly 52 rupees per dollar, "works really well for us," says Mr.
Bhatia.
Overseas travelers: If you were
planning a getaway to Thailand or Singapore for the winter break, you
might want the rupee to cool off before making those reservations.
Each Thai baht now costs 1.66 rupees, 11% more than it did in
January, and the Singapore dollar has appreciated 14% to touch 39.80
rupees per dollar.
If the rupee's weakness persists – as many analysts think they will –
you might have to consider switching your destination from Koh Lanta in
Thailand to Kovalam in Kerala.
Stock and mutual fund investors: In general, stock investors in India
are worse off because a falling rupee adds to the negative sentiment
around Indian stocks.
More specifically, stocks of companies which use imported components
are likely to be hurt because their cost of manufacturing goes up,
crimping profits. These include oil companies which rely on imported
oil, and auto-makers which buy many parts from overseas.
However, investors in software companies like Infosys Ltd. can cheer.
These companies sell their services primarily to clients in the West,
so their earnings would appreciate simply because the foreign
currencies are worth more. Last month, Infosys posted a 9.7% rise in its fiscal second quarter profit, thanks partly to the rupee's depreciation.
Individuals in India who own international mutual funds – which buy
stocks of companies based outside India – should be happy. Though you
buy these funds with rupees, they are invested in local foreign
currencies, which have lately appreciated.
"You have benefited if you are an international investor, simply
because of the currency fluctuation," says Mr. Shah, the financial
adviser.
According to research firm Morningstar India (Pvt.), the Birla Sun
Life International Equity Plan, which invests primarily in developed
foreign countries, is among the best-performing large company stock
funds this year with a gain of 6.17%.
This doesn't mean you should go running to buy an international fund
right now. Things could easily turn when the rupee reverses, so again,
stick with your asset allocation.
Consumers: Like travelers, consumers of imported goods also lose with a falling rupee.
Expect car prices to rise in the near future, as companies try to
pass on their rising costs. Last week, Maruti Suzuki India Ltd. raised
the price of its diesel cars by as much as 10,000 rupees a car in order
to "offset the impact of an appreciating yen and rising input costs," a
company representative told Mint newspaper.
Prices of electronics like computers and televisions, as well as
mobile handsets can be expected to go up, so consider making your
purchases soon.
Expats in India: If you are a member of
the small but growing community of expats in India, who earn in rupees,
you will feel the pinch if you are packing and leaving for good and
have to cash in your rupees for a foreign currency. There isn't much you
can do about that.
If you have to buy things or Christmas presents abroad, it would be
ideal if you can use a foreign credit or debit card to make those
purchases.
Defer the conversion from rupee to the foreign currency for as long
as possible, hoping that eventually the rupee would appreciate, given
the long-term growth prospects of India and so on.
Make a note in your calendar to refill your foreign bank account when the rupee does get stronger.
If you are an expat in India earning in dollars, your rent and other daily expenses just went down in dollar terms.
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