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Depreciating rupee -- a write up

The rupee has fallen more than 26 per cent in the past year, creating a string of negatives - and some positives - in its dipping wake. As gains from a softening crude evaporate, price pressures mount. But for exporters, foreign investors and NRIs, a weaker currency brings good tidings. ET looks at how you need to rejig your investments and spending to make the best of the declining rupee, which hit a record closing low of 57.11 to the dollar on Friday: 

WHY IS THE RUPEE WEAKENING 

Rising dollar demand by oil companies - Oil companies need $400 million a day 

Foreign institutional investors shying away from India - June FII inflows fell to Rs 2,176 crore 

Export earnings not enough - $180 billion trade deficit 

American money market funds exit Europe, hit continental banks that fund Indian companies 

Global central banks build euro firewall, shrink dollar supplies - Create $2 trillion shortage for companies worldwide 

HOW CURRENCY DECLINE MAY HURT 

Investments - Profits of companies with high foreign currency debt and imported inputs may fall; all stakeholders lose. 

Imported items - Fuel and other key imports become costlier, leads to pressure on prices. 

Foreign travel - Travelling abroad may become expensive; bad for tour operators. 

Education abroad - Students will have to shell out more on tuition and stay. Loan burden will shoot up. 

WHO WILL BENEFIT 

Remittances - NRIs, if they park more money in banks here. Their relatives, who get more rupees for the same amount of dollars. 

Investments - Revenues of export-oriented companies will jump. Investors in gold and international funds could gain. 

Foreign tourists - Travel to India gets cheaper; local industry may benefit. 

HOW YOU CAN PLAY THE RUPEE 

Currency futures - Keep off if you are a novice. Else, use them to trade or hedge your exposure. 

Stocks - Exporters and companies with rupee cost but dollar revenues, such as software & pharma firms, tend to gain. 

Mutual funds - Stick to short-term debt funds; little possibility of a further rate cut in scenario of falling rupee.

source:
http://economictimes.indiatimes.com/markets/forex/rupee-depreciation-who-gains-who-loses/articleshow/14348051.cms
Depreciating rupee -- a write up Reviewed by sambasivan srinivasan on 8:34:00 PM Rating: 5

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