Take Advantage of the Rupee's fall - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 31 August 2013
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- By Asad Dossani, Author, The Lucrative Derivative Report


Asad Dossani
This past week was one of the worst for the rupee. The rupee reached new lows, and has experienced significant volatility. To compound India's economic problems, recent GDP figures show the Indian economy reaching its lowest growth figures in 4 years. GDP growth is now 4.4%, less than half of what we had a few years ago.

The primary culprit for the falling GDP growth is once again the manufacturing sector. Manufacturing witnessed a contraction of 1%, and this offset strong growth in services. Manufacturing has always been our weakest link because of all the corruption and red tape that makes it costly for manufacturers to operate.

With all these problems going on, what is an investor supposed to do? A smart investor sees an opportunity in every crisis. And this crisis is no exception. We will all feel the pain associated with the rupee's fall. This includes rising inflation, rising costs of imports, and falling markets. But can we see an opportunity here instead?

The main sector of the economy that is going to benefit from the lower rupee is the export sector. A weak rupee makes our exports cheaper for foreign buyers. Despite the fact that our economy slowed in the last quarter, exports have actually increased. And current sentiment points to increasing foreign demand for our exports.

How do we take advantage of this as an investor? If we are buying stocks, we should look at companies that are large exporters, and that are likely to significantly benefit from the falling rupee. At the same time, we should avoid companies that rely heavily on imports. If the rupee stays low, the export sector will witness a boom in the months ahead, and as investors we are well placed to take advantage of this.

In the long run, the move towards exports is a good thing for the economy. Due to our current account deficit, we need to increase exports and reduce imports. The falling rupee is already making this happen. The market is taking caring of what the government has so far been unable to accomplish.

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is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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5 Responses to "Take Advantage of the Rupee's fall"

Srini

Sep 5, 2013

Good Article. Would you recommend all Tech stocks during this run, that are all EOUs. How about M&M ?

Like 

Mani

Sep 4, 2013

This is something everyone knows. You should have given your recommendations on few such companies.

Like 

Swaminathan.K.V.

Sep 2, 2013

Dear sirs,
I appreciate the points brought out to create awareness to small investors. But I will much appreciate if had given names of a few companies which
are strong in exports and sectors which are strong in exports.

Like (1)

john murnaghan

Sep 1, 2013

Excellent article....makes a lot of sense.....succinct and to the point....now, all we need is a "heads-up" list of the Exporters most likely to be in the vanguard of "best expected performers" neatly diversified by product and market cap.
Back to you...
John M.

Like (1)

Mukesh

Sep 1, 2013

Yeah very much true now we can park our savings to those companies which are export oriented so that we can get a good kind of returns on our investment.

Like (1)
  
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