Importance of Forex Risk Management By Anil Bhansali VP- Fx Risk Advisory.

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Presentation transcript:

Importance of Forex Risk Management By Anil Bhansali VP- Fx Risk Advisory

Guar Gum Industry

India produces million tonnes of guar annually. India is the largest producer with about 80% of world production. Guar gum exports surged from Rs 2, crore in to Rs 21,287 crore in The substantial increase in exports has been due to a strong demand from gas exploration companies in the US and Europe India Leads Guar…

Tough Road… 55% drop in price value,2013 Increasing number of players. New state’s entering Guar market. Increasing competition, would impact the margins.

Increasing Risk… Competitive Pricing Reducing Margins Commodity Risk Forex Risk

FX can’t be ignored !!!

NEXT WHAT OR ???

Rupee depreciated 24% after QE tapering talks Debt market still stands with outflow of more USD 8 billion Recovery seen on the efforts of RBI Still a lot of confusion in the markets

Do Exporters need to worry???

If… QE tapering in delayed by mid 2014 Pro-Business Government is elected, with majority Trade and Fiscal deficit gets under control THEN WHAT???

We can’t control markets. But can manage the risk linked to it…

Strategies for Exporters Every Exporter should have Risk Management Policy. Proper Hedging strategies. Forward Contract should be booked with Option period to take advantage of forward premium. E.g. 1 st day of Month to Last day of month Middle of the Month to Middle of next month One of the Hedging Strategy can be to book 50%,40% and 30% of monthly exposure for next Three months respectively and for rest Nine months 10% of monthly exposure. Keep a stop loss for all uncovered positions.

By evaluating the instruments…

Tips on Fx management Have LIVE Mark to Market linked with data software. Capture all exposures like Rupee PC, PCFC, forward contracts, ECB etc. Maintain Customized MIS Sheet as per company business cycle and policy. Consolidated monthly exposures. Weekly Discussion on Exposure. Quarterly Meetings to discuss further stategies

Thank You For query you can contact