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How does the return on foreign investment change with the movement of rupee?
Published by The Retail Trader · AUG 08, 2026 · Risk Management
While investing in the foreign market, your return is made up of two things – the return of our asset and the movement of currency. The second thing is often forgotten.
If you bought something in dollars and its dollar return was two percent, to your rupee return the rupee dollar movement is added on top of that.
Rupee return increases when the rupee becomes weak, and decreases when the rupee becomes stronger. This effect is not small – it can be equal to the asset return in a few years.
Before taking foreign exposure:
• Currency effects go both ways — it's not just a benefit.
• Feeder funds already have currency exposure.
• Tax treatment may be different from domestic equity.
• Remittance has its own rules and charges.
The real idea of global diversification is that your income, your house and your portfolio should not depend on the same economy. That target does not change with the recent movement of the currency – hence this decision should not be taken by looking at the trend, but by thinking about the allocation.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.