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Indian rupee fluctuation a dilemma?
Wed, 18 Jun Pre-Open

In recent times, the Indian stock markets have witnessed a bull run on the back of the general elections. As the new government came in force, the markets had breached the all time high levels. And this optimism was also seen in the rupee. The Indian currency too had appreciated against US dollar. It has been less than a month's time when the Indian currency was hovering around Rs 58 per dollar. From this scenario various experts were expecting rupee to appreciate further. On the anticipation that the rupee will further strengthen against the dollar, various companies which derive their revenues from exports had witnessed sharp fall in the stock prices. Especially the ones from IT and Pharma sector.

However, all the hopes seem to have come to an end when rupee took a reverse turn and has now again depreciated to Rs 60 levels. While multiple factors have played the role in current rupee movement, viz; disruptions in Iraq which has caused increase in oil price, concerns over rainfall, plus recently declared inflation numbers. It is also pertinent to note the recent recovery at Rs 58 per dollar was more sentiment-driven rather than driven by any change in ground fundamentals.

So, what should investors do in such a situation?

External and internal factors drive the stock markets. And the rupee movement is as a result of various such dynamics. On the external front one cannot do much about the events as the recent case of Iraq crisis. On the internal front, we will still have to watch how the new government reforms help in improving the economic situation. Improving the quality of exports and making them more competitive could be one solution. Another thing for the government is to take structural changes to improve the business climate in the country.

But what investors can do at this juncture is to choose the stocks wisely before investing and not just based on the rupee movement. In our view what eventually works is investment done from a long term perspective in fundamentally strong stocks when they are available at attractive valuations.

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