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Impact-Of-Currency-Movement-On-NRI-Trading-Gains (1)
A non-resident typically has income in foreign currency and normally invests in India. For an NRI does not look at purely equity returns but also the currency returns. In fact currency fluctuations can leave a deep impact on the NRI equity returns. Let us look at four such cases.
If an NRI has invested in India and earned returns of 12% on equity, what would be his effective returns? It would depend on the currency movement. If the Indian rupee lost 6% against the US dollar, then the NRI would have earned effective dollar returns of just 6% (12% – 6%).
On the other hand, if the rupee appreciates, the NRI stands to benefit. Extending the above case, if the rupee had instead appreciated by 4% what would have happened. He would have actually earned 16% (12% + 4%). That is why NRIs investing in India always prefer a strong currency in India.
That is the reason, most NRIs prefer to invest into India at a time when the rupee has weakened and there are hopes of a bounce back in the rupee. That is when they get the dual benefit of equity returns plus currency returns. A weakening rupee, on the other hand works against the effective returns of the NRI investing in India.
Impact-Of-Currency-Movement-On-NRI-Trading-Gains (1)
A non-resident typically has income in foreign currency and normally invests in India. For an NRI does not look at purely equity returns but also the currency returns. In fact currency fluctuations can leave a deep impact on the NRI equity returns. Let us look at four such cases.
If an NRI has invested in India and earned returns of 12% on equity, what would be his effective returns? It would depend on the currency movement. If the Indian rupee lost 6% against the US dollar, then the NRI would have earned effective dollar returns of just 6% (12% – 6%).
On the other hand, if the rupee appreciates, the NRI stands to benefit. Extending the above case, if the rupee had instead appreciated by 4% what would have happened. He would have actually earned 16% (12% + 4%). That is why NRIs investing in India always prefer a strong currency in India.
That is the reason, most NRIs prefer to invest into India at a time when the rupee has weakened and there are hopes of a bounce back in the rupee. That is when they get the dual benefit of equity returns plus currency returns. A weakening rupee, on the other hand works against the effective returns of the NRI investing in India.