The rupee closed at an all-time low of 82.32. Year to date, it has depreciated more than 7.5%. While the rupee’s performance is still better than global peers, it has become a cause for concern for FII. YTD, the FII and FPI have taken out 1.5 Lakh Crores from Indian markets, creating a vicious circle.
The RBI’s response is clear: water will find its level. The value of a currency should reflect the underlying macroeconomics of the country and the strength of the economy. There is no target valuation for the rupee. And so far, macros and the economy are on track.
Clearly, there is room for the rupee to slide more, for FII to withdraw money, and for markets to react. This spells volatility. Volatility can either hurt your portfolio or help it depending on your preparation.
Preparation requires looking for opportunities beyond equity. Debt is attractive now. Don’t chase returns. The opportunity lies in investments that can’t be hurt by interest rate movements, that have no chance of defaulting, and that is liquid. Staying in debt now will allow you to pivot to equity when the time is right.
Keep it simple now, so that you can tackle complications when they arise.