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Foreign Currency Loans are a Worry
Feb 2, 2016

The falling Rupee made headlines recently. The Indian currency is very close to its all-time low against the US dollar. A level of 70 seems inevitable now. There is no uproar about this because India's current account situation is stable and forex reserves are at all-time highs. In addition, the crash in commodity prices has provided much needed comfort. The fall has also brought some relief to the struggling export sector. However, there is another risk of the falling currency that tends to go unnoticed.

Today's chart shows some firms that have a lot of US$ denominated debt. They could face tough times due to the depreciation of the Rupee. Companies with foreign currency loans have seen a jump in interest payments due to the fall in the Rupee. As per an article in the Mint, fourteen companies from India's top 10 corporate groups have very high levels of debt and nine of these have more than 30% of debt in foreign currencies. A look at the long-term price charts provides a sobering reminder why investors should stay away from such stocks.

Data source: Livemint, Credit Suisse, Capitaline

This Chart Of The Day was published in The 5 Minute WrapUp - Is Your Stock 'Priced for Perfection'?

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