Rupee: Are Indian companies ready to deal with the volatility of the rupee?

Mumbai: It is estimated that the amount of exposure to unhedged foreign currencies has fallen by 15 to 16% from levels observed in recent months, which rebadures traders that volatility will likely much lower than previous global uncertainties.

Unhedged exposures dropped to around $ 50-55 billion, from $ 60 billion to $ 65 billion, when the rupee appreciates against the US dollar between January 2017 and March of this year, estimates Standard Chartered Bank. This reduces the chances of losses when the Rupee depreciates.

"Foreign portfolio investors have reduced their exposure by selling badets and importers have increased their hedges in recent months," said M S Gopikrishnan, head of foreign exchange and credit operations at Standard Chartered Bank.

The local unit hit a historic lows of $ 69.09 last Thursday after a global sale of emerging market currencies due to worries over a trade war between China and the United States, as well as tighter monetary conditions. increase interest rates more than expected a few months ago.

Foreign portfolio investors sold domestic securities with a net worth of 47,872 crores this year between January and June, compared with a net investment of 1.48 million rupees in the same period of time. last year, according to data from National Securities Depository Ltd.

"Importers have increased the term of coverage as most of them now cover their debts with two-month futures contracts with purchases," said Abhishek Goenka, CEO of IFA Global. "They remember the 2008 and 2013 periods when the exhibits were not covered, and they paid a heavy price during those times."

During the last currency crisis in 2013, many importers, portfolio investors and US dollar borrowers gave up their liability without making enough advance purchases in US dollars. When the currency slipped rapidly, investors saw the value of their badets erode and companies with foreign loans saw their liabilities grow.

The RBI subsequently ordered all those who were exposed to the US dollar to hedge their position by buying USD in advance or well ahead of their payment time.

"The percentage of coverage by foreign currency debt (borrowers and importers of the ECB) is much lower than that of foreign currency receivables (exporters)," said KN Dey, founder of the Forex consulting firm United Financial Consultant. "Given the threatening global trade war, importers and borrowers should increase their coverage in order to isolate from any adversity."

The local unit gained 0.30% to close at 68.60 on Tuesday.