The Indian rupee’s steady decline against the US dollar has been a subject of concern for policymakers, businesses, and consumers alike. The currency recently breached the ₹87 mark, having fallen from ₹74.5 on January 1, 2022, to ₹87.39 as of March 3, 2025. This depreciation has led to higher import costs, a widening trade deficit, and pressure on India’s current account balance. However, for Indians looking to invest in US markets, this seemingly negative trend presents a strategic advantage.
Because when the rupee weakens, US dollar-denominated investments become more valuable in rupee terms. Historically, the rupee has depreciated at an average rate of 3-4% per year, effectively offering Indian investors an additional layer of returns beyond the performance of US assets themselves.
For the uninitiated, India’s economic history is marked by a persistent depreciation of the rupee against the dollar, a reflection of inflation differentials, capital flows and macroeconomic imbalances. The numbers speak for themselves:
- 1947: 1 USD = ₹1
- 2010: 1 USD = ₹45
- 2022: 1 USD = ₹74.5
- 2024: 1 USD = ₹83+
- March 3, 2025: 1 USD = ₹87.39
This long-term trajectory underscores a fundamental reality: currency depreciation is not an anomaly, but a structural trend. For Indian investors with US dollar exposure, this trend has historically amplified overall returns when repatriating gains to INR.
A Case Study: How Weakening Rupee Can Improve returns
To illustrate the impact of rupee depreciation, let’s consider you invested $10,000 in US stocks from January 2022 to January 2025.
Assuming you allocated $10,000 to US stocks when the exchange rate stood at ₹74.5 per USD, you basically had to invest ₹7,45,000. Over the next three years, assuming an annual return of 15%, the investment grew to $15,209 by January 2025, which is worth ₹13,07,974 in rupee terms, reflecting a total gain of ₹5,62,974 over the initial investment.
However, since the rupee annually depreciated 4.89% from ₹74.5 per USD to ₹86 per USD – a fall of 15.4%, your actual annualised growth would be an impressive 20.6%.
The reason? Returns for Indian investors in US stocks are a combination of two factors: market performance and currency depreciation. While the US stock market itself delivered a 15% return, the rupee’s depreciation of 15.4% (from ₹74.5 to ₹86 per USD) further boosted returns.
When factoring in both the stock market gains and the impact of currency movements, the total return is calculated as 15% + 4.89% + (15% ×4.89%) = 20.6% CAGR. This demonstrates how rupee depreciation acts as a hidden tailwind, amplifying gains for Indian investors when repatriating their earnings back to INR. Even if US stocks had delivered zero growth, currency depreciation alone would have still resulted in a positive absolute return for Indian investors.
Zero market scenario
Let’s now assume your US investments delivered zero returns. You would still have made a 15.4% absolute return between January 2022 and January 2025 – equivalent to a CAGR of 4.89% – due to rupee depreciation.
The last word
While a declining rupee poses macroeconomic challenges, the historical 3-4% annual rupee depreciation serves as a structural buffer.
Moreover, investing in the US also brings forth much-needed geographical diversification. It can serve as both a hedge against domestic risks and a tool for long-term wealth creation.
Subho Moulik, Founder & CEO, Appreciate
This article was first published on Firstpost.
