Contents
What you need
- Currency risk is real: INR-USD fluctuations directly impact your returns when investing in US stocks from India.
- Long-term tailwind: INR has depreciated 3-5% annually vs USD historically, adding a bonus to US stock returns for Indian investors.
- Example impact: Nvidia's 2,400% gain (2018-2026) became 2,900%+ in INR terms due to rupee depreciation.
- Short-term volatility: USD-INR can swing 5-10% in a year, creating temporary fluctuations in portfolio value.
- Don't overthink it: For long-term investors (5-10+ years), currency risk is generally beneficial due to INR's consistent depreciation trend.
- Hedging is expensive: Currency hedging costs 2-4% annually—usually not worth it for equity investors.
What Is Currency Risk?
When you buy a US stock like Tesla from India, you're making two investments simultaneously:
- Investment #1: Tesla stock (hoping TSLA price goes up in USD)
- Investment #2: US Dollar (your INR is converted to USD to buy the stock)
Your final return in INR depends on both factors:
- Stock performance: Did Tesla go up or down in USD terms?
- Currency movement: Did USD strengthen or weaken against INR?
Currency risk (also called forex risk or exchange rate risk) is the possibility that changes in the INR-USD exchange rate will increase or decrease your returns.
USD Strengthens vs INR
Good for you. When you convert back to INR, you get more rupees per dollar. Your returns increase beyond stock performance alone.
USD Weakens vs INR
Bad for you. When you convert back to INR, you get fewer rupees per dollar. Your returns decrease even if the stock went up in USD terms.
USD Stays Stable vs INR
Neutral. Exchange rate doesn't change. Your INR returns exactly mirror USD stock performance (minus taxes and fees).
Simple Example
Scenario: You Buy $1,000 of Tesla
Initial Purchase (January
2024):
• Exchange rate: 1 USD = ₹83
• You convert ₹83,000 to $1,000
•
You buy Tesla at $250/share = 4 shares
One Year Later (January
2025):
• Tesla stock price: $300/share (+20% gain in USD)
• Your 4 shares
are now worth: $1,200
Scenario A: USD Strengthens (1 USD = ₹87)
•
You convert $1,200 back to INR
• You receive: ₹1,04,400
• Total return in INR: +25.8%
(Stock +20%, Currency +4.8%)
Scenario B: USD Stays Same (1 USD =
₹83)
• You convert $1,200 back to INR
• You receive: ₹99,600
• Total
return in INR: +20% (Only stock gain, no currency impact)
Scenario C: USD
Weakens (1 USD = ₹79)
• You convert $1,200 back to INR
• You receive:
₹94,800
• Total return in INR: +14.2% (Stock +20%, Currency -4.8%)
Key Insight: Same stock performance (Tesla +20%), but your final INR return varies from +14.2% to +25.8% depending on currency movements. That's currency risk.
Contrarian Take
Most analysts focus on Nvidia's GPU dominance, but they're missing the real story: their software moat through CUDA. Competitors can match chip performance, but can't replicate a decade of developer ecosystem investment.
Historical INR-USD Trends (2008-2026)
Let's look at 18 years of data to understand the long-term trend:
| Year | USD-INR Rate | Annual Change | Notes |
|---|---|---|---|
| 2008 | ₹39.60 | - | Pre-financial crisis |
| 2010 | ₹45.30 | -14.4% | Post-crisis depreciation |
| 2013 | ₹58.40 | -28.9% | Taper tantrum, capital outflows |
| 2016 | ₹67.10 | -15.0% | Demonetization impact |
| 2018 | ₹69.80 | -4.0% | Trade war fears |
| 2020 | ₹74.10 | -6.2% | COVID-19 pandemic |
| 2022 | ₹82.80 | -11.7% | Fed rate hikes, strong dollar |
| 2024 | ₹83.20 | -0.5% | Relatively stable |
| 2026 | ₹83.50 | -0.4% | Current rate |
Key Observations
1. Long-Term Depreciation Trend: INR has depreciated from ₹39.60 (2008) to
₹83.50 (2026)—that's a 110.8% depreciation over 18 years, or approximately
4.3% per year.
2. Volatility Exists: While the trend
is downward for INR, there are years of stability (2024-2026) and years of sharp depreciation
(2013, 2022).
3. Global Events Drive Moves: Major INR depreciation
coincides with global crises (2008 financial crisis, 2013 taper tantrum, 2020 COVID, 2022 Fed
hikes).
4. RBI Intervention: The Reserve Bank of India actively manages
the rupee, preventing extreme moves. This is why INR depreciates gradually rather than
collapsing suddenly.
What This Means for US Stock Investors
If you invested in US stocks in 2008 and held until 2026, you got a +110.8% currency tailwind on top of your stock returns. A stock that stayed flat in USD terms would have given you 110.8% returns in INR just from currency depreciation.
This is why many financial advisors recommend US stock exposure for Indian investors—it's a natural hedge against INR depreciation.
Real Examples: Tesla, Nvidia, Apple
Let's calculate actual returns for Indian investors in popular US stocks, accounting for currency impact:
Example 1: Nvidia (2018-2026)
Nvidia Stock Performance with Currency Impact
Initial Investment (January
2018):
• Nvidia stock price: $35/share
• USD-INR rate: ₹69.80
• Indian
investor invests ₹69,800 (buys 1 share for $1,000 worth, ~28.5 shares)
Exit
(January 2026):
• Nvidia stock price: $875/share
• USD-INR rate: ₹83.50
• 28.5 shares × $875 = $24,937.50
Returns Analysis:
• Stock
return in USD: +2,400% ($35 → $875)
• Currency impact: +19.6%
(₹69.80 → ₹83.50)
• Total return in INR: +2,900%+
Final
Value:
• $24,937.50 × ₹83.50 = ₹20,82,281
• Initial: ₹69,800
• Gain:
₹20,12,481 (+2,883% total return)
Key Insight: Currency depreciation added approximately 400-500 percentage points to Nvidia's already explosive returns. Indian investors did better than US investors in this case.
Example 2: Tesla (2020-2026)
Tesla Stock Performance with Currency Impact
Initial Investment (January
2020):
• Tesla stock price: $30/share (pre-split adjusted)
• USD-INR rate:
₹74.10
• Indian investor invests ₹74,100 (buys ~$1,000 worth, ~33.3 shares)
Exit (January 2026):
• Tesla stock price: $350/share
• USD-INR rate:
₹83.50
• 33.3 shares × $350 = $11,655
Returns Analysis:
•
Stock return in USD: +1,067% ($30 → $350)
• Currency
impact: +12.7% (₹74.10 → ₹83.50)
• Total return in INR:
+1,211%
Final Value:
• $11,655 × ₹83.50 = ₹9,73,192
• Initial:
₹74,100
• Gain: ₹8,99,092 (+1,213% total return)
Example 3: Apple (2016-2026)
Apple Stock Performance with Currency Impact
Initial Investment (January
2016):
• Apple stock price: $25/share (adjusted for splits)
• USD-INR rate:
₹67.10
• Indian investor invests ₹67,100 (buys ~$1,000 worth, 40 shares)
Exit (January 2026):
• Apple stock price: $200/share
• USD-INR rate:
₹83.50
• 40 shares × $200 = $8,000
Returns Analysis:
•
Stock return in USD: +700% ($25 → $200)
• Currency impact:
+24.4% (₹67.10 → ₹83.50)
• Total return in INR: +895%
Final
Value:
• $8,000 × ₹83.50 = ₹6,68,000
• Initial: ₹67,100
• Gain:
₹6,00,900 (+895% total return)
Summary: In all three cases, currency depreciation boosted returns for Indian investors by 12-25% on top of stock performance. This is the rule, not the exception, when INR depreciates consistently.
When Currency Helps Your Returns
Currency risk becomes currency benefit in these scenarios:
1. INR Depreciates vs USD (Most Common)
This is the historical norm. Since 2008, INR has depreciated 3-5% annually on average. When you hold US stocks, each year's depreciation adds to your returns.
Example: You buy $10,000 of Microsoft when 1 USD = ₹80. Five years later, Microsoft is flat (still $10,000 value), but USD-INR is now ₹88. Your ₹8,00,000 investment is now worth ₹8,80,000—a 10% gain despite the stock being flat.
2. Global Crises & Risk-Off Events
During global crises (COVID, financial crashes, geopolitical tensions), money flows to safe-haven assets like the US Dollar. USD typically strengthens during crises, and if you're holding US stocks, you benefit from both:
- Stock recovery (after crisis bottoms out)
- USD strength (capital flows to US)
3. Fed Rate Hikes
When the US Federal Reserve raises interest rates, it attracts global capital to US assets, strengthening the USD. If you're holding US stocks during Fed rate hike cycles, you get currency tailwinds.
4. India-Specific Shocks
If India faces domestic challenges (high inflation, political instability, current account deficits), INR tends to weaken. Your US stock holdings act as a hedge—while INR assets suffer, your dollar exposure cushions the blow.
When Currency Hurts Your Returns
Currency risk becomes currency drag in these scenarios:
1. INR Strengthens vs USD (Rare but Possible)
If INR appreciates against USD, your returns in INR terms will be lower than USD returns. This has happened occasionally:
- 2007-2008: INR strengthened from ₹44 to ₹39 briefly (before crashing post-Lehman)
- 2024-2026: Relative stability (INR only depreciated 0.4-0.5% annually)
Real Scenario: What If INR Strengthens?
You buy Tesla at $300 when 1 USD = ₹83 (invest ₹83,000 for $1,000 worth).
One year later,
Tesla is at $360 (+20% gain in USD).
But USD-INR rate is now ₹78 (INR strengthened by
6%).
Your INR return: ($1,200 × ₹78) = ₹93,600
Initial
investment: ₹83,000
Total return: +12.8% (instead of
+20%)
Currency cost you 7.2 percentage points of gains.
2. US Dollar Weakness Cycles
USD can enter multi-year weakness cycles (2002-2008, 2011-2014). During these periods, US stock returns in USD terms are partially offset by currency headwinds for Indian investors.
3. India's Economic Boom Periods
If India's economy significantly outperforms globally, INR could strengthen. Foreign capital flows into India could appreciate the rupee, creating a headwind for US stock investors.
Should You Worry About Currency Risk?
The short answer: Not for long-term investors.
Why Currency Risk Isn't a Major Concern
1. Historical Trend Favors You: INR has depreciated consistently over decades.
Unless there's a structural shift in India's economy, this trend continues.
2.
Diversification Benefit: Holding US stocks gives you automatic INR hedge. If INR
crashes, your dollar assets protect you.
3. Stock Returns Dominate:
Over 5-10 years, stock performance (e.g., Nvidia +2,400%, Tesla +1,000%) vastly outweighs
currency fluctuations (typically 10-25%).
4. You Can't Time Currency
Markets: Forex prediction is nearly impossible. Even professional currency traders
struggle. Focus on stock selection, not currency timing.
5. Hedging Is
Expensive: Currency hedging costs 2-4% annually—often more than the currency
volatility you're trying to avoid.
When Should You Care About Currency Risk?
Currency risk matters more if:
- You're a short-term trader: Currency swings can be 5-10% in a year, significantly impacting short-term returns.
- You need money soon: If you're withdrawing within 1-2 years, currency timing matters. Consider waiting for favorable rates.
- Massive allocation: If 70-80%+ of your portfolio is in US stocks, currency risk is concentrated. Diversify across geographies.
- You're income-dependent: Retirees depending on US dividend income face currency risk on cash flows. Consider hedging strategies.
Strategies to Manage Currency Risk
If you're concerned about currency risk, here are practical strategies:
1. Do Nothing (Best for Most Investors)
Seriously. For long-term equity investors, doing nothing is optimal. Currency fluctuations are noise over 5-10 years. Stock returns will dominate.
2. Dollar-Cost Averaging (DCA)
Invest fixed amounts monthly (e.g., ₹10,000/month into US stocks). You'll buy at different exchange rates, averaging out currency volatility.
Example: Invest ₹10,000/month for 12 months. Some months USD is ₹82, some months ₹84. Your average exchange rate smooths out extremes.
3. Diversify Across Multiple Currencies
Don't only invest in US (USD). Consider:
- Europe (EUR): German, French, Swiss stocks
- UK (GBP): UK stocks
- Japan (JPY): Japanese stocks
- Emerging Markets: Brazil, Mexico, Southeast Asia
4. Currency-Hedged ETFs (Advanced)
Some ETFs offer currency-hedged versions. For example:
- Unhedged S&P 500 ETF: You get stock + currency exposure
- Hedged S&P 500 ETF: You get only stock exposure (currency hedged)
Cost: Hedging costs 2-4% annually. Only makes sense if you expect significant INR appreciation (unlikely).
5. Rebalance Tactically
If USD-INR hits extreme levels:
- If INR crashes hard (e.g., ₹90+): Consider booking some profits in US stocks and rotating to Indian equities.
- If INR strengthens unusually (e.g., ₹75): Add more to US stocks (favourable exchange rate).
6. Natural Hedges
Balance your portfolio:
- 50% Indian stocks (INR exposure)
- 30% US stocks (USD exposure)
- 20% Other (Gold, bonds, international diversification)
This way, regardless of currency movements, part of your portfolio benefits.
Frequently Asked Questions
1. Does currency risk affect US stock returns for Indian investors?
Yes, absolutely. Your final return in INR = (Stock return in USD) × (Currency impact). If USD strengthens vs INR, you get bonus returns. If USD weakens, returns are reduced.
2. Should I worry about currency risk when investing in US stocks?
For long-term investors (5-10+ years), no. Historical data shows INR depreciates 3-5% annually, providing a tailwind. Short-term traders should be more cautious.
3. How much has currency impact added to US stock returns for Indian investors?
From 2008-2026, INR depreciation added approximately 110% cumulative gain (or 4.3% annually). A stock flat in USD would have returned +110% in INR just from currency.
4. Can I hedge currency risk?
Yes, but it's expensive (2-4% annually) and usually not worth it for equity investors. Currency-hedged ETFs exist but erode returns over time.
5. What happens if INR strengthens against USD?
Your INR returns will be lower than USD returns. If INR appreciates 10%, a stock that's up 20% in USD will only give you ~10% in INR terms.
6. When is the best time to invest to minimize currency risk?
There's no perfect timing. Use dollar-cost averaging (monthly SIPs) to smooth out exchange rate fluctuations. Trying to time forex markets is nearly impossible.
7. Do US investors face currency risk?
No, if they only invest in US stocks. But if they invest internationally (Indian, European, Japanese stocks), they face the same currency risk Indian investors face with US stocks.
8. Should I convert my profits back to INR when USD is strong?
Only if you need the money. Otherwise, leave it in USD and reinvest. Long-term, staying invested beats trying to time currency conversions.
9. How do dividends from US stocks work with currency risk?
Dividends are paid in USD and converted to INR at the current exchange rate. If INR depreciates, you get more rupees per dividend (good). If INR appreciates, you get less (bad).
10. Is currency risk higher with US stocks vs other countries?
No. Currency risk exists with all international investments. USD-INR is relatively stable compared to, say, Turkish Lira or Argentine Peso vs INR.
The Bottom Line
Currency risk is real, but for long-term Indian investors in US stocks, it's generally a benefit, not a burden. The rupee's consistent depreciation trend (3-5% annually) has added significant returns on top of stock performance.
In the examples we studied—Nvidia, Tesla, Apple—currency impact added 12-25% to total returns over multi-year periods. Indian investors actually outperformed US investors in these cases.
Don't overthink it. Focus on picking quality stocks and holding long-term. The currency will take care of itself.
Invest in great companies. Let time and currency work in your favor.