How a weak R will weaken your finances

The rupee has depreciated close to 10% in the last one month against the US dollar. It fell to almost 50 against a dollar on September 23 from 44.4 in July-end and is now around 49.

According to rating agency Crisil Ltd, the main reason for such a sharp fall is the rising demand for the US dollar by Indian companies amid poor foreign institutional investor participation. In other words, the demand for dollar is higher than its supply, resulting in depreciation of the Indian currency.

Where you may lose

Foreign investment: Any investment abroad, whether in stocks or real estate, would become dearer for you. However, since different countries have different currencies, the actual impact would depend upon the fluctuations of currency of a country in which you are investing. Normally, the rupee is first converted into dollars, which in turn is converted into the currency of the third country.

Foreign education (for aspiring students): Students who plan for next year admissions will end up paying more for the forms of exams such as Test of English as a Foreign Language (TOEFL), Graduate Record Exam (GRE) and Graduate Management Admission Test (GMAT).

Those who opt for the installment method of payment, may either enjoy the benefits or face the brunt of the conversion rate. "I have an offer letter from a university in the US but if the rupee stays weak, then the cost of the course will go up for me," said Arjun Sethi, a student from New Delhi who had taken GRE and TOEFL. "Even if the difference is Rs 4-5, I have no option but to shell out more than estimated."

Foreign education (for existing students): "The overall budget will be affected as every item in the budget list will witness a change, as apart from the application fee, examination fee and the tuition fee, even the cost of living will be higher for the students," said Honey Bhatia, area head, Foster Education Consultants, a Gurgaon-based foreign education consultancy.

"This will have an impact on students who have delayed paying their fees to the universities for the July-September 2011 batch," said Naveen Chopra, chairman, The Chopras, an education consultancy. "Students may now have to pay Rs 50,000-1 lakh over the fee which they were to pay earlier this year. Foreign travel: If you are planning to go abroad this holiday season, the depreciating rupee is sure to burn a hole in your pocket. Add to that, the recent hike in fuel prices, which has pushed up airfare.

"The cost of travel could go up by at least 10-15% due to the falling rupee," said Manoj Gursahani, chairman, TravelMartIndia.com. "The budget conscious traveller will be the one who will be the most hit and this may lead to a shorter holiday overseas."

Travel companies are claiming that they are not passing the extra cost to the customers. "At the moment we are not passing the effect to the customer," said Sabina Chopra, co-founder and executive vice-president (operations) of online travel portal Yatra.com.

If you had made your bookings in advance, you may not feel the pinch. "If a customer has booked and paid for the holiday then the cost is frozen and the customer need not pay additional funds," said Ravi Menon, head (foreign exchange), Cox and Kings Ltd. "However, the customer would feel marginally affected when they want to avail foreign exchange for their personal use overseas."

Where you may gain

Remittance to India: If you are dependant for funds on your son, daughter or relatives settled abroad, you would get more money for the same amount of dollars. "Rupee depreciation would have no bearing on the level of remittances but those receiving remittances would benefit as upon conversion to Indian currency the amount would be higher," said D Joshi, chief economist, Crisil.

Redemption of foreign investments: While investing abroad has become costlier, you stand to gain if you redeem your investments in foreign instruments.

When it is a mixed bag

For equity investors, the rupee depreciation would have a twin impact. In fact, investors with exposure to export-oriented sectors, including information technology and textile, have benefited in the last one month. On the Bombay Stock Exchange, only two indices - BSE IT and BSE TecK - have yielded positive returns in the last one month. In sharp contrast, rupee depreciation adversely impacts sectors that are dependant on imports. These include metals, capital goods and power.

What you should do

You need to stick to your budget as far as possible and curtail unnecessary expenditure.