Currency Volatility: Indian Investors Must Understand Rupee's Impact on Returns

• Currency volatility refers to the fluctuation of the Indian Rupee (INR) against other currencies, primarily the US Dollar (USD).
• A weakening rupee boosts international investment returns in INR terms but increases import costs and inflation.
• Export-intensive Indian sectors like IT and pharma benefit from a depreciating rupee, while import-dependent businesses face higher costs.
• Investors can manage currency risk through global diversification, hedging tools like futures/options or hedged ETFs, and strategic sector allocation.
• Key drivers of rupee fluctuations include global interest rates (US Federal Reserve), capital flows, commodity prices (especially crude oil), geopolitical events, domestic inflation, economic growth, trade balance, and RBI intervention.

Why It Matters: Understanding rupee volatility is crucial for Indian investors to protect and grow their portfolios amidst global economic shifts.