Different kinds of asset classes are currently impacted differently when the Indian Rupee (INR) depreciates in relation to the US dollar (USD). A weaker rupee tends to benefit certain asset classes while having detrimental effects on others. Here’s a simple overview of who benefits and who bears the impact.
Positive Impact:
For sectors and assets that have a large exposure to overseas markets or dollar-denominated revenues, a weaker rupee frequently boosts profitability or valuations. Generally speaking, exporters, assets tied to commodities, and overseas investments benefit from this currency depreciation. These sectors and assets typically do well when the value of the rupee drops, and they include:
1.Export-Oriented Stocks / Sectors
- IT & Software Services (like TCS, Infosys, and Wipro) earn in USD, thus when they convert to INR, their profits rise.
- Pharmaceutical Exporters prosper as their foreign earnings translate into higher profits in INR.
- Automobile, Chemical, and Textile Exporters enhance their growth potential by becoming more competitive in global markets.
2. Dollar-Priced Commodities
- Gold and silver prices are rising domestically and are becoming more expensive in Indian rupees.
- Crude oil explorers (such as ONGC and Reliance’s upstream business) stand to benefit from selling oil internationally in US dollars.
3. Foreign Assets / Dollar-Denominated Investments
- U.S. Stocks / Global Mutual Funds / ETFs – their value increases when the rupee depreciates.
- Crypto Assets – As a hedge against weak fiat currencies, investors frequently earn indirectly from crypto assets like Bitcoin.
Negative Impact:
When the rupee depreciates, the following sectors and assets generally suffer:
1. Import-Dependent Companies
- Oil Marketing Companies (OMCs) – Imported crude is more expensive for OMCs
- Aviation: leasing and jet fuel prices have increased significantly.
- Fast Moving Consumer Goods (FMCG) Firms – The expenses are higher for FMCG companies, which depend on imported raw materials (such as packaging and palm oil).
2. Indian Bond Market
- Foreign investors may withdraw from Government Bonds (FII outflows), which would raise yields and drive down prices.
3.Consumers & Inflation
- The rising costs of imported goods, electronics, fuel, and travel can reduce purchasing power and increase inflation.
Neutral or Mixed Impact:
- Equity Market (Nifty / Sensex) – exhibits a mixed performance, with equities that are heavily exposed to exports rising while those that depend on domestic consumption are under pressure.
- Real estate → While increased remittances from NRIs might occasionally help, imported materials may drive up construction costs.
