Zerodha’s Nikhil Kamath calls falling Rupee a good thing, but does it help common Indians?

Zerodha’s Nikhil Kamath calls falling Rupee a good thing, but does it help common Indians?

He cites rising prices of commodities paid for in dollars to suggest that companies exporting goods might move out of the US.

FPJ Web DeskUpdated: Friday, September 30, 2022, 06:16 PM IST
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He doesn't explain how it helps Indians if inflation goes up due to costly imports. |

The rupee has made gains after a freefall that saw it breach record lows every day until it almost hit the 82 mark against the US dollar. This isn’t good news for a country dependent on oil and gas imports to meet 85 per cent of its domestic demand. But the founder of stock trading platform Zerodha has a different view and sees a silver lining around the dark clouds of inflation that threaten India due to its currency losing value.

A US-centric observation?

What Nikhil Kamath suggests is that a strong dollar could force businesses relying on overseas markets to shift their base out of the US. He cites rising prices of dollar-denominated commodities as a reason for this development, which he feels might be a positive one. While citing the impact of a rising dollar on businesses in the US, he doesn’t add how exactly India will benefit from that.

The reasoning does carry weight

The rationale behind the argument is that the Rupee becomes weaker when the US dollar’s rate increases and commodities paid for in dollars become expensive. This helps Americans but businesses that supply products to overseas markets may suffer lower demand, as importers would have to pay more. This makes American companies dependent on exports less competitive in the global market.

This explains why firms such as software service providers, aircraft makers, as well as brands such as Coca-Cola reduce their estimates when dollar rates go up. But does that mean these firms would shift base from the US to developing countries?

But how does it help inflation hit Indians?

On the other hand, India pays for 85 per cent of its imports in dollars, but only five per cent of its imports are coming from the US. As long as dollar dominance prevails in global markets, Indian imports will continue to get expensive as Rupee falls, even if firms migrate from the US. Although Kamath’s observation in the American context may be right, it doesn’t explain how rising inflation in the country due to costly imports could benefit common Indians.

Founded more than a decade back, Zerodha makes investing in stocks simpler via tech, and provides algo trading, where an algorithm manages investments for better returns. At the same time, Kamath has clarified that while the tech may make trading easier, it doesn’t guarantee positive returns. He has also launched a service to manage portfolios for the ultra-rich in India.

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