Rupee was just 69.10 or 69.20 at the peak of the crisis, when Rajan came in and it is 70 now. In last five years, it has fallen only a little bit, Jamal Mecklai, CEO,
Mecklai Financial Services, tells ET Now.Edited excerpts: Rupee is at 70 to a dollar. What do you make of the rupee story because for the better part of 2017, the Indian rupee was more resilient than other emerging market currencies but now it is falling in line with the rest of the region?Obviously, it is weak. It has hit 70 but 70 is only 10 paisa worse than 69.90 and everybody is going crazy about it. The reality is that for some time now, things have been getting steadily worse. Our current account deficit is higher. Money has been leaving the country and most important, there is global nervousness. So, it may have fallen a little below 70, but that is not the end of the world. It is the end of the world if you have loan and you have not covered it. It is the end of the world if you are an importer and you are uncovered. But the fact is, over the last 10 years from the 2008 crisis to 2013, when the Fed raised rates, the rupee fell by 50%. Between the peak of the crisis and now, the rupee has barely fallen because RBI has been really focussed on containing the volatility. It has been up and down but it was just 69.10 or 69.20 at the peak of the crisis, when Rajan came in and it is 70 now. The reality in the last five years is, it has fallen only a little bit. Exports have not been doing well. So, perhaps it is not a bad thing. But of course, you should not allow things to turn into a crisis like situation. God! It is 70. It is not that big a deal! RBI has got plenty of reserves. They can certainly raise interest rates. They can certainly have a bond. Where it is going to go? Only the boss knows, nobody else.Have Indian exporters and importers started hedging their exposures because the problem earlier was that we never hedged? Typically, Indian exporters, importers, borrowers of ECB did not want to hedge. Have we learnt from the lessons of 2013 and are un-hedged exposures less now?Let me tell you what we do, what I do at least with clients is I start from the premise that nobody knows the market. We have a structured programme where you start with a hedge and every time the market falls, (this is for exporters), you hedge a little more. So, what happens is we generally have a pretty high hedge ratio which means we may be losing a little opportunity now but over time, we have a very good rate. For importers, we do the opposite process, we have a stop loss and we monitor the market and do not hedge or hedge very little. When it falls, you hit the stop loss and get out. There is no other way to manage risk.Over the last 10-11 years, even though the rupee has been falling steadily more or less, if you take the monthly, two monthly, three monthly returns and four monthly returns, which means today minus one month ago, two months ago etc, etc, the average return at every monthly interval is positive. That means on average, the rupee has appreciated on a one month, two month, three months, four monthly basis. It is just when it falls, it falls out of bed. In a sense, given the way the policy has been run, you cannot blame importers for not hedging. What they have been seeing is that the rupee is strengthening on every turn, but then what happens is five, six times or eight times the rupee falls like a stone and then steadies again. RBI needs to be a little more loose with the volatility. They are too uptight about it and that creates problems for people managing it.
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