Kotak Securities Kotak Securities Ltd is one of the oldest and largest stock broker in India. We offer you investing facilities in various instruments like equities, derivatives, currency derivatives, Mutual Funds and IPO, through our branches and the internet. In addition to this we have a full-fledged Research Team with years of experience in the industry.

The Sliding Value of Rupee – Time for NRIs to Rejoice?

2 min read

The weakening value of rupee is indeed a bane to the country, but in many ways, has turned out to be a boon in disguise for the Non-Resident Indians (NRIs). Although the present value of rupee against US dollar is at about Rs 61.8, it seems like the NRIs are waiting for it to drop further so that they make profitable investments back home.

The Sliding Value of Rupee – Rising Concern among Indians

The Indian rupee dropped nearly by 26% against the US dollar within the first eight months of 2013. On August 1, 2011, one US dollar in India used to fetch Rs 44. Later, by January 9, 2012, it got you Rs 52 and Rs 54.68 on January 1, 2013. Then again it slumped to Rs. 68.80 on August 28 2013 and Rs 61.8 per dollar on September 19 2013. Experts predict it to touch Rs 72 per dollar in the next six months.

This record fall in the rupee has been an increasing cause of concern for Indians. And why not, as it is likely that the fall in rupee might increase the prices of essential commodities and imported goods like gold, diesel, and petrol in the near future.People hoping to travel abroad are also worried about any restrictions imposed by the RBI to take money outside India. Furthermore, residents who have children studying abroad have to dole out more in terms of rupees as the value of rupee aggravates.

 
On the other hand, an NRI can expect to benefit from the falling rupee in the coming time, provided they keep invested in India.

Rupee Depreciation – Should NRIs Rejoice?

Indeed. If you are an NRI and are repatriating money back home, this deteriorating rupee gives you more value for your money. It fetches you more then what you earned a year back.

Also, if you are trying torepay your home loan in India, your EMIs would have come down drastically in terms of dollar. Besides, if you are planning to repay your entire outstanding immediately, the total value of your home loan might have dropped significantly due to the sliding value of rupee.Picture a US-based NRI paying Rs 45,000 as EMI on a home loan whose monthly expenditure on August 1, 2011 was $1022; on January 9, 2012, it was $865, whereas by September 19, 2013 it fell to $728 –which means a saving of $1! So you see, if you are an NRI, the weakening rupee definitely comes as a boon to you.

In order to reap windfall gains, you could also avail a personal loan from a foreign bank and place it in fixed deposit in India. That’s because the interest rates charged by foreign banks are comparatively lower than that in India on NRI deposits – where NRE accounts earn around 2-3% on term deposits in the US, they earn around 9% back in India. So, even if the value of the rupee depreciates further, you stand a chance to earn more as the cost of such borrowings from fixed NRI deposits in India work out much cheaper than in the US.According to reports, there has been a significant increase in NRI fixed deposits in India recently, especially post the record fall in rupee.

Also, if you’re looking forward to purchase properties or invest in real estate projects in India, then it goes without saying, the depreciation in rupee offers you a perfect investment opportunity. The real estate market in India allows NRIs to buy property at attractive prices today.It is also a good time for NRIs trading in India to invest in mutual funds as the net value of assets are much lower than what it was last year. You could also invest in the equity market currently since a majority of scrips are operating around 40-60% lower than their prices a year ago. So, if you are charting out your financial plan, ignoring investments in India wouldn’t be a wise decision.

The Flipside

The depreciation has heavy chances of bringing down the value of all your existing NRI investments within the country.For instance, your mutual fund investments of Rs.2,00,000 as against the dollar would have fetched you$3,174 on September 19, 2013, as against $3,236 on January 9, 2012 and $4,545 in August 1, 2011 – which is a drastic loss. So,whenever the rupee falls, there is chance that you will lose your rupee investments you plan to repatriate back in India.

Kotak Securities Kotak Securities Ltd is one of the oldest and largest stock broker in India. We offer you investing facilities in various instruments like equities, derivatives, currency derivatives, Mutual Funds and IPO, through our branches and the internet. In addition to this we have a full-fledged Research Team with years of experience in the industry.

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