盧比接近歷史低點：投資者是否真的需要擔心？

The Indian Rupee’s sharp fall against the US Dollar has once again sparked anxiety among investors. On May 20, the Rupee hit a record low of 96.95 against the Dollar and later closed at 96.86, its weakest-ever closing level. It is currently trading around 95.7.

A weaker Rupee usually means more expensive foreign travel, costlier imports, and rising concerns around inflation and the broader economy.

But a recent report by DSP Mutual Fund suggests the panic around the currency may be getting overdone.

The report argues that while the Rupee remains under pressure, India’s economic position today is far stronger than during previous currency crises, and much of the current stress may already be reflected in the Rupee’s weakness.

Here’s what that means in simple terms for investors.

Has the Rupee already fallen too much?

One of the key arguments in the DSP MF report is that the Rupee now appears undervalued when compared to its long-term fundamentals.

The report points to the Real Effective Exchange Rate (REER), a measure economists use to judge whether a currency is overvalued or undervalued after accounting for inflation and trade competitiveness.

According to the DSP MF report, the Rupee’s REER has slipped to levels seen mainly during periods of major stress such as the 2008 global financial crisis and the 2013 twin-deficit crisis.

“On a trade-weighted basis, the currency is fundamentally undervalued, creating a strong margin of safety,” said Sahil Kapoor, Head of Products and Market Strategist, SVP, DSP Mutual Fund.

In simple terms, the argument is that the Rupee has already weakened significantly, which may reduce the probability of another sharp uncontrolled fall from here.

Is India’s inflation problem less severe now?

Historically, India’s inflation has remained much higher than the US, which naturally weakens the Rupee over time.

But that gap has narrowed sharply.

The DSP report notes that India’s inflation over the last year averaged around 2.3 percent, compared to roughly 2.8 percent in the US.

“Mathematically, a structurally narrower inflation differential implies the long-term depreciation rate of the Rupee against the US Dollar will decelerate, not quicken,” Kapoor said in the report.

In practical terms, this means the Rupee may not weaken as rapidly over the long run as many investors fear.

Is India better prepared for external shocks today?

Oil prices remain a major risk for India because the country imports most of its crude requirements. Higher oil prices typically worsen pressure on the Rupee.

However, the DSP MF report argues that India today has stronger protections than it did during past currency crises.

According to the report, India now earns substantial foreign exchange through:

• services exports such as IT
• remittances sent home by Indians working abroad

Together, these inflows help offset a large part of India’s trade deficit.

“The right question is whether oil stays high long enough to overwhelm India’s services and remittance shield. So far, that has not happened,” Kapoor noted.

The report also highlighted that high gold prices have reduced jewellery demand, which could lower gold imports and reduce pressure on the current account.

Are Indian stocks becoming attractive again?

Another important takeaway from the DSP MF report is that valuations in parts of the Indian stock market have corrected meaningfully.

Foreign investors have pulled money out of Indian equities over the past two years, partly due to concerns around expensive valuations.

But according to DSP Mutual Fund, several large-cap stocks are now trading closer to historical averages, while many businesses continue to generate strong profitability.

Experts say this could potentially make Indian equities more attractive again for long-term investors.

So, should retail investors panic?

Basically the DSP report states that it is not that risks have disappeared, but that much of the fear around the Rupee may already be reflected in prices.

Kapoor explains, “For retail investors, that may mean avoiding panic-driven decisions based purely on currency weakness.”

He further adds, “Betting against the Rupee at these depressed REER levels and tight inflation differentials is a low-probability trade.”

So, for long-term investors, a weak Rupee alone may not be a reason to lose confidence in Indian assets.