Several companies are a happier lot today. Firms which borrowed funds from overseas markets in early 2004 with a maturity period of three years are now repaying much lesser in dollar terms, thanks to a rising rupee. Back of the envelope calculations indicate that these companies would have saved almost Rs 40 crore on account of the rising rupee which has reduced their payout liability.

Between March and May 2004, $0.16 billion was raised through loans with a maturity period of three years, by India Inc. The average exchange rate over the three months in 2004 was Rs 44.73 per dollar. Going by this exchange rate, the value of the loans raised was Rs 715.68 crore. As against this, the average exchange rate between March and May 2007 is Rs 42.36 per dollar. Consequently, the value of loans being repayed works out to Rs 677.76 crore, implying a saving of about Rs 38 crore.

Some of the companies that will get to ride the rupee hike bonanza are Reliance Communications, Bharat Forge, Sun Pharma, Ranbaxy, Nicholas Piramal and Watson Wyatt, among others. External commercial borrowings are connected to the extent of liquidity available in the domestic market as well as domestic interest rates. Thus, with the rupee appreciating, these borrowings will be far more attractive and will increase substantially.

Companies which have a huge import bill are also rejoicing. Those not adversely affected from the currency gaining are auto, engineering and aviation companies. Big companies with huge order books in the auto sector such as, Hero Honda, Maruti, Tata Motors and Ashok Leyland are benefited as the imported price of their raw materials cost less.

Engineering companies like Suzlon also gain on raw material cost savings. Jet is the other gainer on its aviation fuel costs. Deccan Aviation management said that rupee appreciation is having a favourable impact on the lease side. Jet Airways's international revenues will get hurt but it has a natural hedging in the shape of falling fuel cost. There will be more savings on fuel, lease rentals, interest and depreciation.

The rupee appreciation has benefited the domestic oil marketing companies (OMCs) as their procurement prices are benchmarked to international product prices. At current exchange rate OMCs are losing Rs 6.10 per litre on petrol and Rs 3.75 per litre on diesel, whereas in first fortnight of May last year the companies were losing Rs 6.51 per litre on petrol and Rs 6.66 per litre on diesel. The under-realisation on sale of kerosene is Rs 14.75 per litre and Rs 170 per cylinder of LPG, compared to an under-recovery of Rs 115 and Rs 16.13 on LPG and kerosene respectively last year.

Foreign investors too, have another big reason to invest in Indian stocks apart from the 9 per cent growth rate of the Indian economy over the past three years. The rupee hasn't just risen against the dollar, but also against currencies of other emerging markets. As a result, returns from the Indian stock markets in dollar terms are higher than returns from other regional markets (in dollar terms).

Between April 1 and May 7, the Morgan Stanley Capital Index (MSCI) for the Indian market is up 13.47 per cent in dollar terms, although it has risen by a comparatively modest 6.7 per cent in local currency terms.

Thus, foreign investors putting their money on the MSCI India basket of stocks have seen their holdings appreciate by 13.47 per cent, partly because the price of these stocks has moved up, but mainly because the rupee has appreciated sharply against the dollar over the period.

In dollar terms, the MSCI India index for the current quarter has outperformed the MSCI Emerging Markets index as well as the MSCI Asia index. The MSCI India index has also performed far better in the current quarter than for the year as a whole.

For the foreign investors in particular, who brought in US dollars to buy Indian stocks, the rising rupee has doubled their returns, better than in 2006. Domestic investors on the other hand didn't gain from the strength of the Indian currency over the last few months.

The appreciating rupee against the dollar has proved to be a blessing in disguise for gold exchange traded funds (GETFs). Internationally gold is traded in US dollars and since the rupee has been getting stronger against the dollar, it has put the rupee value of gold down. The trading volume in GETFs has jumped five-fold in the last one month. The total volume of trades in GETFs has surged from an average of around 2,500 units traded a month ago on April 23, to around 12,000 units as on May 21.

Thus, an upside of a rising rupee is that many a domestic companies and foreign institutional investors are benefiting. However, in the long-run a rising rupee will dampen the growth in the economy. Foreign investors will remain as long as growth is there.