Mumbai: Corporates should have a consistent policy on hedging to protect their balance sheets from adverse forex impact, according to experts.
"Corporates have to follow a consistent policy on hedging. Sometimes, you can't have a 100 percent hedging policy and sometimes zero percent hedging for exposures," Anand Rathi, chairman of brokerage firm AnandRathi said here.
He was speaking at a seminar on 'Rupee fall and its impact on the economy', organised by the industry association IMC Monday.
The rupee should appreciate in the next three months as the current account deficit (CAD) numbers improve, he said.
The Indian unit had fallen around 10 percent in the last two months against the dollar due to large scale FII outflows from debt markets on the back of apprehension about tapering of the US stimulus programme. It is currently hovering around 59-60 level against the US currency.
A falling rupee is likely to adversely impact corporate balance sheets with foreign currency exposures without effective hedging. It is estimated that around 60 percent of total foreign currency exposures are unhedged in the domestic economy.
"Perhaps, corporates had not gone for effective hedging as rupee was stable for a long period.
However, current volatility demands hedging on all exposures," Mecklai Financial Services Chief Executive Jamal Mecklai said.
He said 58 to the dollar is the correct value of the rupee and added the Reserve Bank should come up with a gold deposit scheme to reduce high CAD witnessed in the economy.
On the impact of rupee fall on exports, Mecklai said if the Indian currency stabilises at the current level, exports will surge due to competitiveness.
Experts opined that reducing supply side constraints in coal and gas, among others, would help in reducing the CAD, which would support rupee.
"Improving supply side constraints like coal linkage along with boost to investor sentiment will support the currency," said Saugata Bhattacharya, Senior Vice-President and Chief Economist at Axis Bank.