While a certain section of population will gain from the rupee slide, others may be hit badly. Either way, stay cautious it may continue in the short term

The Indian rupee seems to be fighting a prolonged battle. Given the high trade deficit, drying up of capital flow, and fears over the stability of Eurozone, the rupee is getting weaker by the day. On 24 May, it hit an all-time low of 56.38 before recovering to close the day at 55.65. The situation is unlikely to change for a while. Nitin Rakesh, CEO, Motilal Oswal AMC, suggests that Indians should get used to this 'new normal' for the rupee. "The rupee is likely to continue to remain in the mid-50s, and become the new normal for some time to come," he says. This sharp decline of the rupee from 44/$ to 55.50/$ spells trouble for you for a variety of reasons, and may even require you to revisit your budget plans for the year. Everything, from your investments to spending and savings, will have to be reviewed to prevent your finances from falling into a disarray. We list out the areas in which you are likely to feel the pinch and those from which you could benefit.

Where You Loose
Investments (importers, foreign
currency borrowers)
For stock market investors, the weakening rupee hurts on several fronts. The companies with significant foreign currency borrowings, or those which import raw material from abroad, have already taken a hit. India Inc's profitability has been significantly affected due to the mark to-market hit taken on foreign currency exposure. The weakness in the rupee may further dampen the FII sentiment, which has already been impacted due to policy inaction and macro troubles. This is because the value of their investments is eroding, which may prompt them to pull out more money from the markets.

Foreign travel
With every fall in the rupee, travelling abroad becomes more expensive as one has to fork out more in rupee terms for every dollar spent. Already, foreign tour operators have jacked up the prices for their tour packages and may revise them further. Even if you have booked the foreign tour package in advance, you may need to furnish the differential amount to the extent of the rupee slide.

Imported goods and fuel
Your desire to own the latest electronic gadget may cost you more than you budgeted for. Since most imported goods are billed in dollars, Indian consumers are likely to see the prices inch up further. Also, the companies that import raw material in large quantities will be forced to hike prices for the end consumer. This means that cars and two-wheeler manufacturers could realign their prices. The area where consumers are likely to be hit worst is the spike in fuel prices. With the declining rupee, the crude oil import bill for the government has also gone up, forcing it to jack up petrol prices. A further fall in the rupee may lead to more hikes.

Foreign education
The pain for parents of Indian students studying for their foreign degrees will not go away. Given the sharp decline in the rupee, they will have to incur a higher expenditure in rupee terms to cover their tuition fees, food, stay and other living expenses. SP Dhanapal, Sudha NRI Consultants, says, "The students going abroad for education will have to factor in a 10-15% rise in cost." Those taking an education loan to pay for the foreign education will have to bear a higher burden as the loan requirement will shoot up to that extent. Some may be forced to take a top-up on existing loans, which means that they will have to pay back that much more. Some parents may even have to dip into their personal savings to fund the shortfall.

Where You Benefit
Families of NRIs, exporters, investors in gold
and international funds stand to benefit from the massive slide in the rupee.

Foreign currency remittances
The non-resident Indians who are remitting money back home are effectively putting more money into their wallets as they will get more rupees for every dollar. Dhanapal says the rupee slide will bring cheer to nearly 2 crore NRI families. "Bulk remittances will witness a rise as NRIs take advantage of the rupee-dollar movement," he adds.

Investments (exporters, gold, global funds)
Within the stock universe, export-oriented companies and those with significant foreign currency revenues will benefit from the rupee decline. If gold is already a part of your portfolio, you will benefit if rupee slides further. Investments in global funds have already seen a surge in returns even if the NAV has not risen much, because their performance in rupee terms has been multiplied to the extent of the fall.