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Investors should ride out volatile cycles to register gains, says Money Today Executive Editor

Investors should ride out volatile cycles to register gains, says Money Today Executive Editor

Equity investment is a long-term game and investors have to ride out the cycles to register meaningful gains.

On July 1, 2011, a dollar would have fetched you Rs 44.50. On July 8, 2013, the rupee had slid to slightly over 61 to the US currency, its lowest point till date. If you just held on to your dollars through this period it would mean a massive gain of 37 per cent in a two-year period, without any effort.

The pace of the rupee's slide has accelerated since the beginning of the current calendar year. In fact, in the one month to July 8, the rupee fell by nearly 8 per cent, giving policymakers the jitters and the Reserve Bank of India sleepless nights because of its negative impact on the macro-economic situation.

The slide has been caused by several factors including the continued exit of investments by foreign institutional investors, a large current account deficit and the dollar gaining strength on the back of hopes of a revitalised US economy. Even as the Reserve Bank of India is putting all its might behind moves to stabilise the currency against intense pressure from market forces that are dragging it the other way, there are views that the worst is not over yet.

Some like Nomura feel that the rupee remains overvalued and could go down to as low as 70 against the greenback. While the depreciating rupee may have a deleterious effect on the economy and your personal finances, in times such as these, anyone with dollar earnings, including companies that have substantial revenue earnings in dollars, would be smiling all the way to the bank.

Thus, amid rising concerns over the currency, there may be stocks that could gain due to the depreciating rupee. In our cover package, we bring to you some investment options to earn good returns in the event of a continuing erosion in the rupee's valuation. We also look at how you should juggle your commodity portfolio and how your debt investments will perform on account of the rupee movement and the RBI's tough measures announced on July 15.

While the rupee tumbled, the BSE Sensex again closed at over 20,000 on July 15, the second time since May 15 that it crossed the threshold. This happened amid macro-economic concerns, including disappointing industrial production numbers and rising inflation. In May, industrial production contracted 1.6% to reach its lowest in 11 months.

The first half of the year has been turbulent for the Indian stock markets, with the indices swinging erratically every few days. A swing of 300 points or more either way has become a common occurrence. The directionless market is leading to huge investor apathy. However, there are several factors that could drive the market up from here on and should keep you interested, including the series of reforms measures by the government. Read all about them in our latest issue.

As we have always held, equity investment is a long-term game and investors have to ride out the cycles to register meaningful gains.

SARBAJEET K SEN
Executive Editor