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Yogi Zone

Useful articles for your finance management by our team of experts

smart strategies to combat rupee fall

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In my previous article on

Rupee Fall

, the effect on personal finances has already been mentioned. Today, when the Indian Rupee has plunged to a record level of 60.7650 against the dollar, Indian families stand to be the most impacted. As per a study by ASSOCHAM, the rupee fall has resulted in an increase of monthly expenditure by 20% on an average for an Indian family. Below is the snapshot of some of the findings of Assocham: -

  • Average monthly expenditure has increased by 15-20%.

  • 78% have decreased spending on international food chains and rest preferred only on occasions.

  • 65% decrease in the amount they spend on foreign brands.

  • 77% percent indicated fall in the amount they spend on foreign vacations.

  • 49% have decreased the amount they spend on home appliances; 44% for home and personal electronics; 32% for automobiles.

*

Source – TimesofIndia

 

With the price hike in consumer durables, mobile phones and fuel already making headlines, one thing that comes to the mind of an Indian consumer is how to fight back this situation? Here are some of the strategies that could be your savior in these times of rupee tumble: -

 

1)

   

Asset allocation in International Funds – Mutual Fund industry is currently offering three types of global funds:  those that allow direct investing in global markets; funds that use the feeder route to invest in an existing global fund; and lastly, fund of funds that invest in several funds to achieve international exposure. While an allocation of 5-10% of the portfolio can be allocated in these funds, a thorough homework should be done before investing in these funds.

 

Here is the snapshot of returns of some of the international funds.

         performance of international funds

           

*Source-Valueresearchonline.com

Returns above indicate that some of the international funds gained up to 23% when the  currency witnessed a fall of 11%.

 

2)

   

Gaining Sectoral Funds  Some of the sectors like IT,Pharma will benefit from the rupee slump as they derive their maximum revenues from US markets. Similarly, export oriented sectors will also perform better during the rupee fall. One can look at allocating 5-7% of their portfolio in these sectors, after careful consideration though.

 

A quick look at some of the mutual funds with the sector theme indicates that positive returns have been posted by them during rupee slump.

 performance of sectoral funds

*Source-Valueresearchonline.com

 

Final Wrap Up

It’s important to take clue on the forthcoming trend of Indian rupee and it is advisable to increase the asset allocation in global and sectoral funds, if the Indian economic condition worsens. It’s profit booking time for those who had invested in these funds earlier.

 

Take a look at your current portfolio as you could take advantage of a falling rupee  if you have companies that are largely export-oriented in your portfolio. On the other hand, you should try to decrease or completely eliminate those companies which have a large import bill. Be watchful that your portfolio is not too much skewed to a specific sector or is over diversified.

 

About the Author:

Reenika is a Certified Financial Planner and has more than 6 years of experience in the financial service industry. She can be reached at

expert@investmentyogi.com

 

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