Rupee at 90: When a Macro Number Starts Showing Up in Portfolios

“Currencies don’t move in isolation — they move through economies, supply chains, and balance sheets.”

The Indian rupee crossing the ₹90 per dollar mark is more than a currency headline. It reflects a deeper macro shift unfolding across trade flows, inflation dynamics, and competitiveness.

 In reality, it is the outcome of several forces moving together — weaker exports, shifting inflation dynamics, global supply-chain structures, and the limits of currency-led competitiveness. What looks like a macro headline today quietly becomes a portfolio reality over time.

Since the start of 2025, the rupee has weakened by more than 5%. The immediate trigger was a sharp contraction in exports — down nearly 12% year-on-year — particularly to the US, India’s largest export market. That slowdown coincided with higher global tariffs and softer external demand, creating a clear imbalance between dollar inflows and outflows. Markets reacted quickly, but the more important story lies beneath the surface.

Why This Time the Currency Move Is Not Just Nominal

A weaker currency usually helps exporters — but only if inflation stays contained. This is where the current phase stands apart.

India’s consumer inflation has cooled sharply, slipping to sub-1% levels, while US inflation continues to hover in the 2–3% range. This gap matters. It means the rupee’s depreciation is not being neutralised by domestic price pressures. In real terms, Indian goods have become cheaper for global buyers, not just optically cheaper due to FX conversion.

Real effective exchange-rate indicators reinforce this view. The rupee is not just weak against the dollar; it appears undervalued across a basket of currencies. Historically, such conditions do not persist for long. But while they do, they reshape competitiveness — unevenly and often temporarily.

The Trade Reality Behind the Currency Narrative

There is a common assumption that a weaker rupee automatically boosts exports. That assumption ignores how modern trade actually works.

Roughly 70% of global trade now flows through value chains where intermediate goods cross borders multiple times. India may not be deeply embedded in these chains, but its manufacturing base remains heavily dependent on imported inputs. Across manufacturing, import intensity for raw materials stands close to one-third. In export-oriented sectors such as electronics, chemicals, gems, and jewellery, imported inputs account for well over 60% of total costs.

This creates a structural offset. While exporters earn more rupees for every dollar of revenue, a large part of that benefit is absorbed by higher input costs. Currency depreciation improves competitiveness — but only partially, and often with a lag.

China’s Deflation: The Missing Piece in the Puzzle

Another layer complicates the story further. India’s import dependence is disproportionately tilted toward China. At the same time, China has been operating in a prolonged deflationary environment, with inflation close to zero.

Contrast that with India, where inflation has averaged around 4% over recent years. The outcome is counterintuitive but critical. Even with a weaker rupee, Chinese imports often remain cheaper than domestically produced alternatives. In such cases, currency weakness stops helping Indian manufacturers and begins distorting competition instead.

This dynamic explains the renewed focus on dumping concerns and safeguard duties in sectors like steel and industrial goods. Currency weakness cannot compensate for structural cost differences when trading partners are exporting deflation.

Clear Beneficiaries of a Weaker Rupee

IT Services Dollar-linked revenues with largely rupee-linked costs make IT the cleanest currency beneficiary. Even without volume growth, reported revenues and margins improve when the rupee weakens.

Pharmaceuticals Export-heavy pharma companies benefit from dollar revenues, especially in US-facing portfolios. Those with better backward integration or pricing power translate currency gains more efficiently.

Specialty Chemicals Export-oriented players see realization tailwinds, but benefits vary widely based on import dependence and pass-through ability.

Auto & Two-Wheeler Exporters Companies with meaningful overseas exposure benefit where import content is limited and global demand remains stable.

Sectors Under Pressure

Oil Marketing & Fuel-Linked Businesses: India imports most of its crude. Every ₹1 depreciation increases the landed cost of oil, pressuring the current account and downstream margins unless global crude prices fall meaningfully.

Aviation: A classic rupee-negative sector: dollar-linked fuel and lease costs versus rupee revenues create direct profitability stress.

Consumer Electronics & Hardware Retail: High imported content forces companies to either raise prices (hurting demand) or absorb costs (hurting margins).

Capital Goods & Import-Heavy EPC: Specialized equipment and industrial imports become more expensive, leading to near-term margin and working capital pressure. 

Why Currency Alone Cannot Drive Export Growth

History offers a clear lesson. When imported inputs exceed roughly 30% of production costs, the positive impact of currency undervaluation on exports fades quickly. This is particularly relevant for India’s electronics and manufacturing ambitions, where domestic value addition remains limited.

Over the long run, export performance depends far more on productivity gains, infrastructure quality, and ease of doing business than on exchange-rate levels. A weak currency can act as a cushion, but it cannot substitute for structural reform.

Building a Currency Hedge Portfolio: Practical Strategy

Portfolio Allocation Framework:

For a ₹1 crore portfolio, consider the following currency-hedge allocation: Core domestic holdings (60%): Continue with high-quality Indian equity funds and direct stocks; Export-oriented companies (20%): IT services, pharmaceuticals, chemicals, textiles with dollar revenues; International exposure (15%): International equity funds, US index ETFs, global diversified funds; Gold/commodity hedge (5%): Sovereign gold bonds, gold ETFs, commodity funds.

Stock Selection Criteria:

Look for companies with >50% revenue from exports, natural currency hedges through dollar earnings, strong pricing power to pass through costs, low import dependence for raw materials, and healthy balance sheets without excessive dollar debt.

Sector-Wise Currency Sensitivity:

High Positive Correlation (Benefit from weak rupee): IT Services, Pharmaceuticals, Chemicals, Textiles, Auto Components (export-focused), Engineering Goods, Gems & Jewelry

High Negative Correlation (Hurt by weak rupee): Airlines, Telecom (equipment imports), Consumer Electronics, Paints & Adhesives, Plastics, Tyres

Implementation Timeline:

Immediate (Q3-Q4 2025): Review existing portfolio for currency exposure, identify and reduce heavy import-dependent holdings, initiate positions in export-oriented blue chips.

Medium-term (Q1-Q2 2026): As the currency finds a new trading range, investors can gradually raise exposure to gold as a hedge against rupee weakness and imported inflation.

Long-term (2025-2027): Maintain a balanced currency-aware portfolio, rebalance annually based on rupee movements, stay informed on trade policy, and RBI intervention patterns.

Conclusion

The rupee’s move to ₹91 and subsequent stabilisation around the ₹90 level confirms that currency weakness is no longer a hypothetical risk but a lived reality. Rather than treating this as a threat, informed investors can incorporate currency dynamics into portfolio construction. A well-designed currency-aware portfolio does not merely defend against depreciation; it adapts to it. By tilting toward export-oriented businesses and using gold as a stabilising hedge, investors can preserve purchasing power and improve portfolio resilience in an environment where currency strategy is inseparable from stock selection.

Where Tikona Capital Finserv Pvt.Ltd Fits In

At Tikona Capital Finserv Pvt. Ltd., portfolio construction integrates currency dynamics alongside fundamentals, rather than treating them as external risks. Our model portfolios emphasise businesses with natural dollar-linked earnings, balance domestic exposure with selective hedges, and use gold strategically to stabilise purchasing power. Portfolios are reviewed and rebalanced as currency trends, trade flows, and RBI policy evolve. Whether the objective is global education planning, managing overseas liabilities, or preserving real wealth.

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