Weak rupee, slipping fortunes

Travelling and studying will become more expensive. Even your stock portfolio is likely to suffer.

If you are an Indian professional and earning in dollars, here is some good news. You have got a salary rise of eight per cent, in rupee terms, in the past one month. In other words, if you were earning $2,000 or Rs 91,500, your salary is now Rs 99,120.

Only, such professionals will also have to pay more tax, warns Homi Mistry, tax partner, Deloitte, Haskins & Sells. The liability on the additional income will be an additional Rs 2,286 for a person in the highest income tax bracket, as it will be India-sourced income.

On September 22, the rupee closed at 49.56 from 48.35 a dollar a day earlier. And, bankers are not bullish about the rupee in the near future.

The first thing to be hurt will be investments. Certified financial planner Arnav Pandya says if you hold stocks of companies in oil and gas, infrastructure, fertiliser or the tyre business, your returns will take a hit: These companies will fall when the rupee falls. They procure their raw material from abroad, for which they now need to pay more.

At the same time, if you have exposure to information technology and export-oriented companies, you will benefit because the depreciating rupee improves their top line. So, too, with investments in mutual funds with foreign exposure, like an Indo-China fund. "Returns dip when converted into rupees. The net asset value of feeder funds is also impacted as you buy units in rupees when the underlying (asset) of the fund is bought in foreign currency," says Pandya.

"Students going abroad may have to pay a higher equated monthly instalment towards an education loan," says S Govindan, general manager, personel banking & operations, Union Bank of India. He says depreciation is factored into education loans, thereby helping students in such situations.

Travelling abroad has become more expensive. Tour operators say foreign travel cost can easily go up by at least 10 per cent in such a scenario. A large part of this would depend on your miscellaneous expenses. If you heavily depend on credit card(s) for shopping and dining abroad, you would be better off using cash at such times. Reason: Each time you swipe your card, there is a currency conversion fee levied, of two to three per cent or slightly more. So, at a time when the rupee is down eight per cent, a conversion fee of another two per cent could take your card bill up by 10-15 per cent.

Shyamal Saxena, head - retail banking at Standard Chartered Bank, says normally banks settle the card payment on the same day or the next day, taking into account that day's exchange rate. So, if the rupee falls on the day your payment is being settled, you are in for a higher card burden. And, not paying on time could lead to an interest on the dues of up to 50 per cent.

This apart, your travel insurance could pinch pocket. Components of it (medical expense, personal accident, baggage and passport loss) are foreign currency-denominated. And, insurers could raise premiums if the rupee continues depreciating, as these costs are borne by the insurer.