Thread by @myfinology

Indian Rupee falls to all-time low against US dollar 😲

What does it mean for Common Man? ⤵️

#Rupee #stocks

The primary impact of rupee depreciation is on country's imports, as it becomes more expensive.

This is because it takes more rupees to pay for the same quantum of imports.

Also, this has direct impact on your monthly budget.⤵️

- Cost of your necessities-

Crude oil, fertilizers, medicines and iron ore, which India imports in large quantities will get costlier with fall in rupee value

Though these items are not for your daily consumption, they still have impact on our finances.

How?⤵️

Example : India is largely dependent on imports for crude oil consumption which is used as fuel and also one of the primary inputs in various manufacturing industry.

Rupee depreciation means petrol and diesel prices will go and cost of transportation would ⬆️

So, this would directly increase distribution cost for manufacturers and the final burden would be transferred to end consumers.

The cost rise would be more evident in FMCG space - soaps, detergents, deodorants and shampoos, where crude oil is an input in manufacturing process.

- Education

This has an impact on those looking for overseas education as their costs will go up!

It affects students who have borrowed money to fund their education as the borrowing is in rupee while the spends will be in foreign currency, so students may fall short of funds.

- Vacations

It is also a reflag for those who have plans to travel abroad. weakening rupee means overseas travelers have to re-evaluate their budget and plan their travel accordingly.

- Buying a car

It has an impact on the automobile sector as well as

◉ Some of the components used are imported
◉ Some MNCs will have to pay higher royalty to foreign parent firms.
◉ Some firms have foreign currency loans in the form of external commercial borrowings

Therefore auto companies are expected increase their prices which means buying a car will become more expensive

- Investors

The value of currency share a positive relationship with stock market.

When the rupee ⬆️, it boosts the economy and the stock markets rise but when the rupee ⬇️, it is a cause for concern leading to a fall in prices.

But it's not true for all types of companies ⤵️

Companies importing raw materials or having foreign borrowings will suffer the most.

Sectors like oil and gas, auto, metals etc. are negatively impacted by the depreciation in the currency. So the share prices of these sectors may negatively impacted!

Export-based sectors like IT, Pharma, Textiles, etc do well when the rupee depreciates as exporters get more value for the same amount of goods that they export in dollars.

So exposure towards these sectors can help you to deal with volatility.

One can invest in International Funds in this scenario. Any appreciation in the value of the foreign currency or any depreciation in the rupee will increase your net returns.

Building a diversified portfolio and rebalancing it as & when it demands is the best solution to deal with market volatility!

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