Amid rising crude oil price and dollar gaining strength, currency experts have suggested that it may well be the case that rupee further depreciates to 70 mark this week against the dollar and in its light if you have expenses in dollars and means of earning in rupees, you need to hedge your position to get away with the exchange rate risk.
For it you need to have or gain access to earnings in dollar from your rupee income. This can be done so, by taking position in international or foreign funds. So now the question arise what are these foreign funds?
The funds give exposure to an investor in international funds thus reducing their country risk and hence spreading risk factor across geographies. Same is the strategy we need to apply, when we see our home country situation in crisis and want to keep out investment returns not fall prey to such a threat.
But while deciding on such funds you need to be careful on these parameters:
1. Do not bet on a international fund which is global only by name and in an otherwise scenario has position in Indian stocks.
2. Look for the cost factor when taking position in foreign funds.
3. Do not give into international funds that are risky as then you add your risk both country and equity risk.
4. Remember your soul motive is to tide off the currency risk by hedging through gaining access to income in dollar currency.