Rupee weakens to near record low; RBI intervention eyed

MUMBAI: The rupee opened weaker to close in on a record low on Friday, with traders expecting the Reserve Bank of India to step in to sell dollars should the currency approach 60 against the greenback.

The rupee was trading at 59.69/70 to the dollar At 0333 GMT, not far from a record low of 59.9850 hit on Thursday
For India Inc, the rupee’s slide comes as another blow at a time revenue growth is slowing and margins are being squeezed. The currency has lost 11% since May. This will adversely impact capital-intensive sectors and firms with foreign borrowings and those who import raw materials heavily.

Automobiles, capital goods, petroleum, power and telecom companies will bear the brunt of a weak rupee.

However fund managers say investors can benefit from select themes such as technology and pharma focused funds and international or feeder funds.

"The deprecation of the rupee is likely to increase pressure in both bond and equity markets. Investors are thus advised to put in money in cash-related products, such as money market schemes, where the risk is low," said Akshay Gupta, MD & CEO at Peerless Funds Management Company.

"Investors should do their homework before investing in mutual funds in these tough times. One can consider investing in schemes where the fund portfolio has less exposure to companies that have high import and foreign currency debt on their balance sheets," Debasish Mallick, MD & CEO at IDBI Asset Management, said.

The rupee's fall has boosted performance of international funds or feeder funds offered by Indian mutual fund houses. In the past six months, when the local currency fell about 11%, some international funds posted nearly 22% gains, outperforming the Sensex by a mile.