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Exporters, hitherto withholding their dollar earnings overseas hoping for better returns vis-à-vis the rupee, are now bringing their foreign currency earnings in a hurry.
The turnaround has been triggered by widespread expectations that the rupee's precipitous fall against the dollar has bottomed out.
What is making it more difficult to hold on to their dollar earnings is the strengthening of the rupee against the dollar by nearly Rs 1.50 over the last week (from Rs 53.14 to Rs 51.82) and by Rs 2.40 since mid-December last year (when it was Rs 54.23) as well as the continued depreciation of the euro. The euro has come down from around Rs 70 to about Rs 65 over the last one month. Europe accounts for a fifth of India's total exports.
The current bear run on the rupee may have ended with the Government and the Reserve Bank of India's recent moves.
Over the past few days, the central bank has moved to deregulate interest rates on non-resident external deposit accounts and ban rebooking of forward contracts once cancelled. The government has also permitted qualified foreign investors including individuals abroad to directly invest in the Indian equity market.
All these have helped shore up sentiment and arrest what at one time seemed to suggest a free fall of the rupee.
“Earlier, exporters were hesitant to bring back the dollar earnings due to the forex volatility and the expectation of rupee going to record lows of even over Rs 55 versus a dollar. But now things have changed. They (exporters) want to bring it back as soon as possible fearing lower rupee returns,” an export industry source told Business Line .
Most exporters, around 50-60 per cent of them, had taken forward covers in the range of Rs 46-50 against the dollar, the sources said. They added that though the rupee crossed the 50-mark to touch lows of even Rs 54.3 to a dollar, the losses on account of that are only notional.
Small exporters hit
However, small exporters are faced with a different problem as their buyers abroad, taking note of the rupee depreciation from a little over Rs 44 earlier last year to a dollar to over Rs 50 now, have started asking for discounts. Rupee has reportedly been Asia's worst performing currency in 2011 with around 20 per cent depreciation against the dollar.
The major gains were made by services exporters, especially from the information technology sector, as they do not have any imported inputs unlike merchandise exporters who import goods to value-add and then export. The gains made by most goods exporters on account of rupee depreciation have been offset to some extent due to the import content.
The former President of the Federation of Indian Export Organisations, Mr Ramu Deora, said he expects the rupee to be stable at around Rs 50 till March and be in the range of Rs 45-55 in the coming fiscal.
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