Rupee fall exacts a quiet toll on FPIs' India investments

The steady slide of the rupee against the dollar has significantly hit the dollar returns of foreign portfolio investors (FPIs) in India, despite the local currency being among global currencies least affected by a stronger greenback.

- Ram Sahgal

The BSE Dollex 30, the dollar equivalent of the bellwether Sensex 30, has underperformed the benchmark index, returning 5% (to last year's closing of 7,126.68 on 31 December) compared to the Sensex's 8.16% (closing of 78,139.01), data from the BSE showed.

"Global investor returns are indexed to the dollar and, thus, the fall in rupee last year has impinged on their dollar returns," said Ashish Gupta, chief investment officer at Axis Mutual Fund.

The rupee slipped 2.9% in 2024, from ₹83.23 to the dollar as of end-2023 to ₹85.66 on 31 December last year. The slower fall relative to other currencies was backed by RBI selling dollar through spot, over-the-counter (OTC) forwards and non-deliverable forwards (NDF) markets.