Importers are rushing to hedge their dollar positions amid the sharp depreciation of the rupee against the American currency and expectations of further volatility even as exporters are holding off after suffering mark-to-market (MTM) losses on earlier hedges.
If we are able to get our act together, we may be able to see growth climb again to more than eight per cent, says Jamal Mecklai.
Most Indian companies are still quite far from having good risk management processes. The companies surveyed ranged from mid-sized (Rs 250-500 crore or Rs 2.5 to Rs 5 billion) to large (over Rs 1,000 crore or Rs 10 billion) in scale, and represented a broad spectrum of industries like IT services, textiles, engineering, auto ancillaries, conglomerates, commodity producers and consumers, agro and food, pharmaceuticals, etc.
The Indian rupee, which has depreciated 1.1 per cent so far in August, is expected to decline further on the back of a strengthening US dollar and a weakening Chinese yuan, according to a Business Standard poll of analysts. The Indian rupee hit an all-time low recently, closing at 83.15 per dollar. Five of the 10 respondents said the Indian currency might touch 83.5 per dollar in August itself, while others said the worst could be over.
Banks are being squeezed every which way -- on capital, on compensation, on credibility. Jobs in financial services will become scarcer and will pay less.
Given the stability of the rupee over the last 10 months, many companies have been tempted not to hedge their foreign currency risk.
Going by the real effective exchange rate, the rupee is overvalued
While the US is definitely recovering, Europe, Japan and, now, China are all going through another wave of what some fear could be a multi-year slowdown.
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