Rupee decline starts to cut into Sensex earnings in dollar terms

The recent decline in the US equity market has revealed a significant valuation gap between the Indian and the US equity markets

The recent depreciation in the rupee has begun to adversely affect the Sensex earnings per share (EPS) in constant currency terms. The index’s underlying EPS when converted into US dollar is down 2.2 per cent during the month, even as it continues to rise in rupee terms. This is the first significant decline in Sensex EPS in dollar terms in the post-pandemic period and could partly explain the fresh round of selling by foreign portfolio  investors (FPIs).

FPIs have turned net-sellers in September after turning net-buyers in August. According to the data from the National Securities Depository, FPIs sold $391