COMPANIES BRACE FOR IMPACT FROM VOLATILE RUPEE, HIGHER OIL PRICES

MUMBAI: Indian companies are bracing for a volatile rupee, as higher oil prices and the threat of a global trade war have sent the local currency into a tailspin, touching record lows against the dollar quite frequently.

Economic vulnerabilities, however, pose a bigger challenge to the large number of importcentric small and medium enterprises (SMEs) and mid-sized corporates, given that their foreign currency exposures are often unhedged, say currency strategists. “Most importers in India do not hedge because they feel there is a cost to it, at 4.5% per annum; besides, the rupee remains largely range-bound. In my assessment, 90% of the SMEs and mid-sized importers remain unhedged,” said Sajal Gupta, head, forex and rates, Edelweiss Securities.

Last week, the rupee closed at ₹68.85 a dollar, after hitting a record low of ₹69.12 on Friday. The sectors that are likely to have made maximum losses include edible oil, polymers and petrochemicals, and commodities.

“Not too long ago, when the rupee was at 63, there were predictions that it may go all the way down to 60. Now, when it has touched 69, we are hearing of 72. There are many external variables impacting currencies. There are always counter-balances; we have to watch the situation carefully, and take the bull by the horns to make balanced and quick decisions, while refraining from making speculations,” said VS Parthasarathy, group chief financial officer at Mahindra and Mahindra.

Large corporates are wellhedged. According to Ashish Vaidya, head of trading at DBS Bank, large and sensitive exposures have already been covered for by corporates.

(Swaraj Singh Dhanjal and Kalpana Pathak contributed to this story.)