How Rupee Depreciation Affects Indian Companies Differently

A Weaker Rupee Is Not One Story

When the rupee weakens against the dollar, the news is often presented as simply bad. For some companies it is. For others it is good news. And for many, the effect depends on details buried in the notes to the accounts.

In 2026, the rupee weakened from around 90 per dollar at the start of the year to about 95 by October, as oil prices rose and foreign investors sold Indian assets. That kind of move does not hit every company the same way.

Four Kinds of Exposure

1. Revenue in foreign currency. IT services, pharma exporters, specialty chemicals and textile exporters earn in dollars or euros. A weaker rupee raises their rupee revenue.

2. Costs in foreign currency. Oil marketing companies, airlines, electronics assemblers and edible oil processors import inputs priced in dollars. A weaker rupee raises their costs.

3. Debt in foreign currency. Companies that borrowed abroad, through external commercial borrowings (ECBs) or foreign bonds, owe more in rupee terms when the rupee falls, unless they have hedged.

4. Prices linked to global markets. Steel, aluminium and other commodities are often priced in India at "import parity," close to what it would cost to import them. A weaker rupee lifts domestic prices for these producers, even if they export nothing.

A Worked Example: The Same Move, Four Companies

Illustrative example. The rupee moves from 90 to 94.5 per dollar, a 5% fall.

A 5% currency move changes the exporter's profit by over a fifth and nearly halves the importer's. The company with costs and revenue in the same currency is affected far less. The borrower's debt grows without any change in the business, and the increase usually shows up as a foreign exchange loss in the profit and loss statement.

The Long-Run Drift

Over long periods, the rupee has tended to weaken against the dollar, partly because inflation in India has usually been higher than in the US. If Indian prices rise 4% a year and US prices 2%, a gradual fall in the rupee of about 2% a year keeps the real exchange rate roughly unchanged.

This matters for how exporters are judged. A steady, slow depreciation is not a windfall. It mostly offsets the faster rise in Indian wages and costs. The large gains and losses come from sudden moves that run ahead of the inflation gap, like the one in 2026.

The 2026 Move in Context

The rupee's slide in 2026 came from several forces at once: a sharp rise in oil prices that widened the import bill, steady selling by foreign portfolio investors, and higher US interest rates that pulled money toward dollar assets. The RBI sold dollars from its reserves to slow the fall, and its foreign exchange reserves fell by tens of billions of dollars in the months after February.

Central bank intervention can smooth a move, but it rarely reverses one driven by these underlying forces. Companies with large unhedged exposure cannot count on it.

Hedging Changes the Timing, Not the Direction

Many companies hedge with forward contracts and options. Hedging smooths the effect over time, but it does not remove it forever. Hedges expire and must be renewed at new rates. An exporter that hedged at 90 will keep receiving close to 90 for a while, then move to the new rate as hedges roll off.

Notes to the accounts disclose foreign currency exposure and the hedges in place. Read them before assuming a company gains or loses from a currency move.

Pass-Through and Pricing Power

An importer that can raise prices passes the cost on to customers. One that cannot absorbs it. Consumer companies with strong brands can often pass on costs within a quarter or two. Companies selling into competitive or price-controlled markets may not be able to.

For oil marketing companies, retail fuel prices in India have often been held steady for long periods, so a weaker rupee can mean large losses on each litre sold until prices are revised.

Second-Round Effects

A weaker rupee also changes the wider economy. Imported inflation can push the RBI to raise rates, as it did in October 2026. Higher rates then affect every company with debt. Exporters may also face pressure from customers to share their currency gain through lower prices.

Habits for Assessing Currency Exposure

1. Find the share of revenue and costs in foreign currency, from segment and geographic disclosures.
2. Check foreign currency debt and whether it is hedged.
3. Read the hedging note for the size and rates of forward contracts.
4. Ask whether the company can pass on costs to its customers.
5. Separate operating effects from foreign exchange gains and losses when reading results.

The Reframe

The rupee's value is one number, but every company sees it through its own mix of revenue, costs and debt. Before calling a weaker rupee good or bad, ask: good or bad for whom?