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Many of us have financial goals to build a corpus to fund our overseas travel and/or kids’ education abroad. For resident Indians the corpus is to be built in Indian currency. The money is then withdrawn from the corpus as and when required. The recent rupee depreciation has now added another layer of uncertainty. It has made it difficult to determine what the right corpus size is when the actual time of financial goals arrives. The exchange value of rupee at the time of funding the goal has become a difficult and unpredictable variable.How do we handle this uncertainty and still ensure our goals are fulfilled no matter what the exchange valuations are? We deal with it by adding a portion of assets in our portfolio that either brings dollar income from rupee investment or a hedge against currency risk. Here are some ways to do so:Add IT, FMCG and Pharma stocks – The companies doing business in pharmaceutical and information-technology services have strong revenue stream arising from exports. This fetches them revenue in international currency (US $, Euro, GBP etc.). The figures, when converted to Indian rupee, give an additional valuation attributing to rupee fall in the markets. The companies doing business in fast-moving consumer goods – their products being non-discretionary goods, never have a fall in demand arising due to the economic slowdown. Thus an investor can add stocks of such companies to insulate his portfolio from rupee depreciation. One has to be thorough with his analysis to choose them based on the company performance in the last decade (at least), profitability ratios, fundamental analysis, market cycles, sector/industry trends in tandem with macro-economic factors. Add mutual funds that focus on IT, Pharma & FMCG sectors – Several funds that have been known for their performance, can find a place in one’s portfolio. SBI Pharma, Reliance Pharma, UTI Pharma & Healthcare, Franklin Infotech, ICICI Pru Technology, SBI IT, BSL New Millenium, SBI FMCG and ICICI Pru FMCG are several that can be reviewed for performance and considered for portfolio allocation. Needless to say, they need to be evaluated with respect to overall portfolio strategy and its proportion that is stipulated to fund one’s financial goals having dependency on international currency.Add International funds that invest in global markets – Investing through mutual funds in international markets helps one achieve diversification. It’s a good way to hedge against rupee devaluation . However such investments should be done after thorough risk-reward analysis because these funds are radically different from each other. They differ in investment mandate and portfolio composition. They also differ in their set-up – a) that invest directly in global markets, b) that use feeder route to invest in existing global fund and c) fund of funds that invest in various other funds to achieve global markets exposure. Tax implications should be carefully considered before making a decision to allocate a portion of portfolio to international funds.Investing in dollar-denominated bonds – One can also consider investing in dollar-denominated bonds of Indian companies. The companies that are chosen should have demonstrated stellar business results, profitability, market leadership, foreign currency revenue stream and high credit rating. They are one of the preferred ways to hedge against currency depreciation chosen by NRIs and local HNIs.- Amit KukrejaThe author is the founder of WealthBeing Advisors and a member of The Financial Planners’ Guild, India (FPGI). FPGI is an association of Practicing Certified Financial Planners to create awareness about Financial Planning among the public, promote professional excellence and ensure high quality practice standards.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
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