Mutual funds that could outperform as rupee touches new lows

The value of Indian currency is continuously falling and it is touching new lows almost on a daily basis for the past few days. It has depreciated by more than 10 per cent the year till date. Even in today’s trade (August 31, 2018), it has touched a new low of Rs. 71.42. The persistent fall in the Indian currency is due to higher demand of US dollar due to rising crude oil prices. Weakness in our currency is not an isolated event, other emerging market currencies are also following the suit.

What is surprising is that benchmark equity indices that have a positive correlation with the value of INR is going against the currency and is touching new highs.

Historic data for the past several years show that as the value of rupee appreciates, Sensex goes up, however, if rupee depreciates, Sensex also tanks. The reason for such weakening correlation is because of the change in the constituent of the Sensex, which is less sensitive to the rupee movement.

Nevertheless, there are some sectors and funds that are sensitive to the movement in Indian rupee. Pharmaceutical and Information Technology remain the two primary sectors that are the prime beneficiary as they earn a major share of their revenue in US dollar.

Below is the list of best performing funds in the last one year in different categories.