The Indian rupee fell for the second time this week to a record low of 77.63 against the dollar amid a broader fall in Asian currencies. The USD is up 4.3 percent against the domestic currency so far this year, according to data from Bloomberg.
International investment acts as a hedge against the depreciation of the rupee. with recent rupee depreciationExperts say that Indian investors will benefit in the US markets.
“Your investment in Indian stock market is in Rs. However, when you invest overseas (in US stock markets) it is in dollars. You first convert your money into USD to invest and then back to INR when you redeem it. When the rupee weakens against the dollar, it effectively means an additional return on your US investment.”
If an investor had invested 3000 in a fund at a time when USD INR is Rs. 60 rupees per USD. This means the investment is USD 50 in dollar terms. If the fund earns 0% net return then the investment value in USD terms is $50, explained Ram Kalyan Meduri, founder and CEO of Jama Wealth, a SEBI registered investment advisor, sharing the example. ,
when investor Redeems, if say USD/INR exchange rate, than $70 per dollar 60 When he has invested, the investor will receive the redemption proceeds 3,500, profit of 500 on investment of 3,000 Thus, a depreciation of Rs.
“This is perceived as a significant advantage for Indian investors who have already invested outside India. However, the math is not that simple, once we take into account market returns. Indian markets have given significantly higher relative returns as compared to US markets. We suggest investors not to overdo the foreign investment; While some exposure is good, allocation should be moderate,” Meduri said.