When the rupee falls against the dollar, what investments you can make

Vimal Joshi
Updated: 15 Dec 2021, 09:22 AM IST
TL;DR.

As the Indian rupee slides fast, inflation is a natural corollary which can further erode the worth of your investment. There are ways to protect your wealth regardless of the rupee's fall. Read further to know more in detail

There are some investments which one can make to contain the adverse impact of rupee’s decline.

There are some investments which one can make to contain the adverse impact of rupee’s decline.

As the rupee continues to fall against the dollar, it is a matter of concern for most investors. With the dollar becoming stronger, the rupee comes under pressure and continues its march towards 75 against the dollar. It was trading in the range of 74.805 and 74.935 against USD on Oct 7, 2021.

However, there are some investments which one can still make to contain, if not minimise, the adverse impact of rupee’s decline.

 

We list here a few of such investments which make sense when rupee becomes weak:

 

I. You can invest in the US-based companies which earn in the US dollars. Their revenues are not impacted by the fall in rupee. So, one can invest in them to circumvent the impact of the fall in rupee.

II. One can invest in the information technology (IT) companies in India which essentially draw their revenue from exports. If you see the growth of IT companies, you will be pleased to know that the Nifty IT index rose by around 18 percent in just the first four months of 2021-22.

In the previous year 2020-21, Nifty IT index grew by a whopping 115 percent, which far outpaces the decline in rupee of 3.87 percent (from 73.44 to 76.399).

III. Aside from this, all the export-oriented sectors such as pharmaceuticals stand to benefit when the rupee falls. The investors, as a result, can consider investing in them.

In fact, the Nifty pharma index grew by around 76 percent in 2020-2021. Not only this, in the first quarter of 2021-22, it grew again by nearly 16 percent. This rise, just as in the IT, can compensate for any marginal fall in the Indian Rupee.

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When the rupee falls, one can explore the IT sector to invest. 

As a matter of fact, when rupee falls against dollar — the imports get pricier. India is an oil importing nation. And as the rupee's value declines against the dollar, the fuel prices follow suit, thus triggering a domino effect on other goods such as fruits and vegetables.

So, it is vital to note that each coin has two sides. The fall of the rupee is bad news, but it depends which side of the coin you are focusing on.

 

First Published: 15 Dec 2021, 09:22 AM IST
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