TSCFM Finacle Asks: As a stock investor, how do I benefit from the falling Rupee?

The objective of this club is to provide a space for learning and discussion regarding current issues in the world of finance. Students are encouraged to strategize and offer solutions to questions put forth that would create real world impact.

To kick off the first discussion, Prof. Singh writes this:

As a stock investor, how do I benefit from the falling Rupee?

We all know that the near 11% fall in currency between January and July has been hurting large parts of India Inc. This has suddenly added a lot more uncertainty to the stock markets which were already not doing well on account of global gloom and domestic policy paralysis.

The last week has seen few government reforms to contain the CAD and also consistent efforts from RBI’s side to deal with the volatility of the Rupee. One may say that all export-oriented stocks could be a good option. But it is also important to take into account the performance of export-driven companies which has just increased moderately in contrast with the sharp decline of the Rupee. The benefits of the Rupee decline have not been realized by exporters. In my view, profitability of exporters is linked more to aspects like competitiveness, growth, pricing and global economic performance. The Rupee’s downfall can only fix up financial statements for a while.

In a scenario like this, what should be the investment strategy?

Look at sectors/industry generally and then stocks specifically as far as equity investments are concerned. Also, please analyze financial statements to see foreign business exposures and debt exposures in foreign currency. Considering that the trickle-down effect of reforms and volatility of markets will take time to correct, you may take a medium-term investment view of around 1 – 1.5 years.

So here is the question for all of you to answer – As a stock investor, how do I benefit from the falling Rupee?