The Indian rupee is acquiring muscle as if it was on steroids, affecting the way a host of institutions and companies have been doing business, some adversely, like IT sector and apparel, while Indian tourists have seen the strong rupee make for cheaper travel abroad as it now buys more foreign currency than it did before.
The Indian currency breached the 9-year high rate set in May 1998, by closing at Rs 40.28 to the US dollar, after having threatened to do the same in May 2007 when it reached an intra-day high of Rs 40.28, though it did not close at that level, having weakened at the fag end of day. The Monday, 23 July 2007 intra-day high that the rupee reached was Rs 40.23.
While this was mainly due to the high inflows of money via the foreign institutional investors, what is encouraging the rupee towards increasing potency is the weakening US dollar—rupee has become stronger by 9.05% in 2007 itself.
The Reserve Bank of India has been trying to sell dollars to keep the rupee weak so that exporters are not impacted too severely, after having kept a hands-off policy for a month and more earlier, but even this is proving inadequate as FIIs have flooded India with dollars in an attempt to buy into Indian equity markets. Ergo, the Sensex closing at yet another all-time high of 15,732.20, up 167 points on Monday. Analysts are saying that if the RBI stops selling dollars the rupee will weaken to below Rs 40 levels.
But for the Indian bent on travelling abroad, the rise and rise of the rupee is a great opportunity to voyage more, see more, buy more and yes, enjoy more. It also brings the added incentive of making foreigners treat the Indian tourist with much more respect—earlier the Indian traveller was the most frugal one and therefore, foreigners were not very conducive to providing extra deluxe service. That has changed now. A rise in the value of the rupee by 9% against the dollar means that you are getting a bigger bang for your desi buck and you can splurge on luxuries too now.
Customers at Thomas Cook counters, you can also buy forex from SOTC and other banks in India, are a happy lot. Vineet Nayyar, a student jetting off to the US for an MBA, no he does not have admission in any college, but as he said, “I am going abroad to look for opportunities. Whether they are in terms of jobs or study, I will decide later. The very fact that the dollar is cheaper, is allowing me to spend an extra four days in US on my budget. It’s great.”
FII investments since January 2007:
| Date | Purchase (Rs cr) | Sale (Rs cr) | Net (Rs cr) |
| July1 | 58791.1 | 37340 | 21451.1 |
| June | 49249.5 | 47606.8 | 1642.7 |
| May | 47254.2 | 43155.4 | 4098.8 |
| April | 48141.2 | 41462.1 | 6679.1 |
| March | 50678.5 | 51760.3 | -1081.8 |
| Feb | 55803.9 | 48564.2 | 7239.7 |
| January | 45052.2 | 44560.1 | 492.1 |
1Up to July 20
| (Rs m) | MFs | FIIs | Total |
| 13-Jul | 2,958 | 23,464 | 26,422 |
| 16-Jul | (3,719) | 16,601 | 12,882 |
| 17-Jul | (1,030) | 9,464 | 8,434 |
| 18-Jul | (1,748) | 12,337 | 10,589 |
| 19-Jul | 1,116 | 8,831 | 9,947 |
| 23- Jul | | 10,255 | |
| Total | (2,423) | 70,697 | 68,274 |
