Sensex pops: Sensex bounces back, but rupee falls: Could this be a sign of currency appreciation?

After hitting a 52-week low of 15,183.40 on June 17, Nifty bounced back last week to close near the 15,700 mark. Looking at the growth indicators, we think this is a good entry point for long-term investors if they invest strategically.

It is imperative that investors choose industries with high growth potential.

Is the Indian Rupee Really Depreciating?

It would be wrong to say that the Indian rupee is depreciating. Instead, we must consider that the US dollar is rising in value. Nearly a year ago, the US dollar’s trading index was near 92.

Today, however, it is trading at 105, up 14% year-on-year. At the same time, in the last year, the transaction value of the rupee has fallen from 73-74 to 79, down 7% year-on-year.

This shows that while the US dollar has appreciated about 14% against other global currencies, it has only gained 7% against the rupee.

As a result, the Indian rupee has outperformed other currencies in the broader international market.

Impact of Rupee Depreciation on Indian Economy

The Indian economy may face challenges in managing the deficit in tandem with the ongoing rupee devaluation. As a developing country, we only have a few options to deal with this.

Looking at the current energy landscape, the government should continue to buy oil from Russia. It will help protect India’s fiscal deficit.

In addition, the currency devaluation will certainly affect most businesses across the country. However, some industries can also benefit from it.

Currency weakness is likely to have an opposite effect on the IT sector, the pharmaceutical sector and export-oriented businesses.

Future of Indian Rupee

Although we have seen a decline in the transaction value of the rupee, we remain optimistic about its growth. From here, the rupee’s value is expected to increase.

However, the potential for cooperation between Sweden and Finland in the near future NATO Summit on June 30th seems to be the only warning.

If this alliance passes, it will have a significant impact on the global economy. It will further lead to a fall in the rupee. In any other case, the Indian rupee will rise from the current 79.

(Author is Co-Founder, Ashika Global Family office Services)

(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These recommendations do not represent the views of Economic Times.)

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