1. How to manage FX Risk in Volatile Market

2. Forex is not my Business!
The Biggest Myth
Forex is not my Business!

3. USDINR 10 year chart Taper Tantrum 25% in 5 months
PM Modi Election 15% in 9 Months
4% Appreciation in 5 months
USDINR 10 year chart
GFC and Fiscal deficit expansion
16% in 5 Months
5% Depreciation in 2 months
Grexit and Euro Crisis 23% in 6 months
RBI +
FII Inflows +
UP Election
4% in 5 months
Steady depreciation in 3 years
UPA Re-election 15% in 1 year

4. Systematic Factors leading to Volatility in USDINR
DXY
Oil Prices
US Treasury yields
General Elections

5. Forex Gains and losses even out over a period of time
Common Myths
Forex Gains and losses even out over a period of time
Forward contracts are the only available hedging tools
Inter Bank rates may differ from Bank to Bank

6. Case Study : 2016 Brexit
In the three months following the Brexit vote, the British currency fell from $1.45 to a pound to $1.25.
In the last quarter, JLR (Jaguar Land Rover PLC) lost £400 million (about Rs 3,300 crore) in incremental foreign exchange losses, according to Kenneth Gregor, chief financial officer at JLR.
The fall in net profit is close to 96% of Quarterly Profits.
Source: Report dated 17th March 2017 in Forbes India

7. Forex Loss as % of Turnover
Case Study : Rupee Slides from 45 to 52
(Rs. In Crores)
Company
Profit Before FX Loss
FX Loss
Reported Profit
FX Loss as % to Profits
FX Turnover
Forex Loss as % of Turnover
JSW Steel Ltd
1614
513
1101
46.59%
4113
12%
Tata Motors Ltd
2637
294
2343
12.54%
2206
13%
PFC Ltd
41.97
31.17
10.8
288.61%
822
3.79%
Back
Source : Moneycontrol

8. Benchmarking Case study For Importers
Are Forwards Always Effective?
Day 0 Spot 71.50
Day 30 Spot ?
Forward Premium : 25 Paisa
Book Forward contract and fix the price for Day 30 at 71.75
Scenario 1
Stay open and do the conversion at the price prevailing on Day 30 at ?
Scenario 2
Can we hedge the exposure through any other alternative tool ?
Scenario 3

9. Structured Hedging For Exporters
Participation at Market
Receipt at
72.25
Unlimited Protection
Unlimited Participation
Buy Insurance
71.50
Sell Insurance
72.25
Zero cost seagull

10. Structured Hedging For Importers
Participation at Market
Payment at
Spot – Re 1/-
Unlimited Participation
Protection
Unlimited Protection
Payment at 70.75
Sell Insurance
70.75
Buy Insurance
71.75
Sell Insurance
72.75
Zero cost seagull
Back

11. Live FX Terminal

12. EHOM Historical Recommendation
Edelweiss Hedge Optimizer Model (EHOM) recommendation for today is “Moderate Hedge”.
Date
Spot
EHOM Recommendation Import Perspective
Percentage move
12th Aug 2018
68.79
Hedge
0.3% INR Appreciation  
1st Nov 2018
73.39
Unhedged
7.26% INR Depreciation
5th Dec 2018
70.71
4.17% INR Appreciation
6th Feb 2019
71.54
1.17% INR Depreciation

13. Comprehensive Solutions – Edelweiss FX & Rates

14. Our Clients….

16. Questions and Answers

17. Edelweiss Forex & Rates
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At Your
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Edelweiss Forex & Rates
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Sajal Gupta
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