The Rupee with its 10% drop over the quarter admittedly took us by surprise. It now holds the enviable spot of being the worst performing Asian currency for the quarter. If the “macro-pundits” are to be believed then “We ain’t seen nothing yet” and the Rupee is basically doomed. After all, the tapering signals from US Fed, policy inaction in India, election season and a high current account deficit (CAD) all point that way. Well, we are not so sure. We can think of several reasons why Rupee should be stronger. For instance gold, oil and several other commodities that make up majority of our import bill, are getting cheaper. The government is approving infrastructure projects in the earnest ($2bln just this last month). CAD itself at 3.6% was much better than expected. However, our arguments only add to the din of expert nonsense you hear all over the financial media. We cannot predict the direction of Indian Rupee with much certainty and we don’t think the pundits can either. Although fully aware of the macro risks to our portfolio we try not to base our decisions on things we cannot predict nor control.
Notes & Letters
A collection of our thoughts, views, and excerpts from our investor letters.