Children's Education in USA: Dealing with the Currency Risks

24 February, 2021 0 Comments

            Educational Investment

Giving children the best of education is a dream for all Indian parents. Many parents aspire to send their children abroad to pursue their higher studies, especially to the USA.

According to the 2017/18 Open Doors Report on International Educational Data released by IIE & US Department of State Bureau of Educational and Cultural Affairs, number of Indian students in USA was 1,96,271 as on 2017/18 and this is an increase of 10,000 students over the previous year 2016/17. India is the second leading place of origin for students headed to the US comprising of 17.92% of all the international students, which is a high number.

Pursuing education abroad requires better Financial Planning, and most important, understanding and planning for currency fluctuations. Hence, this article analyses the currency risk involved in pursuing education in USA and intends to answer the following few questions.

  1. Will investments in India be good enough to reach this goal?
  2. What will be the impact of the depreciation of INR vs the USD?
  3. Is it good to plan investments in USD for this goal and where?

To answer the above questions, we have done the performance analysis of Indian Equity (Index & few Mutual Funds) v/s US Equity (Index & active mutual fund) along with INR vs USD currency movement.

Following are the performance details of SENSEX, HDFC Equity Fund, ABSL Equity Fund, ICICI Pru Bluechip Fund, DOW Jones Index, NASDAQ 100, S&P 500, INR V/s USD, Franklin US Opportunities Fund (Fund of Funds investing in US markets).


(As on 29-July-2019)

 Rupee Depreciation

opportunities fund

As per the above chart, 10 year returns of US equities + Rupee Depreciation is almost the same as Indian equities i.e. ( range between 14%-18% p.a.) except NASDAQ 100 i.e (23%)


(As on 29-July-2019)

MF returns

Index returns 

As per the above chart , 5 year returns of US equities + Rupee Depreciation is almost the same as Indian equities i.e. ( range between 11%-16%) except NASDAQ 100 i.e (17%)


(As on 29-July-2019)

 Investment Management Firm

Investment Management Firm Bangalore

As per the above chart, 3 year returns of US equities + Rupee Depreciation is almost the same as Indian equities i.e. ( range of 11%-14%) except NASDAQ 100 i.e (18%)

OBSERVATION: Since, equity market returns are driven by sentiment in the short term, it is more prudent to analyze returns over a 5 to 10 year period. However, the 3 year rupee depreciation (1%) indicates the prevailing trend, despite rupee having touched its life time low (74/USD) during this 3 year period.


(As on 29-July-2019)

Performance Nasdaq 100 Rupee Depreciation Total Return
10 Year Performance (XIRR) 20% 3% 23%
5 Year Performance (XIRR) 15% 2%  17%
  1. NASDAQ 100 is an index which is made up of non-financial companies of US and with a bias and focus on the Tech & Telecommunication companies. Their weightage is around 54%. The NASDAQ 100 outperformance is predominantly due the big 5 Tech giants which are the most valuable global technology companies today namely Amazon, Microsoft, Alphabet, Facebook etc. Due to their innovation and monopolistic nature in their respective fields, the returns of NASDAQ 100 has been exceptional.
  2. The advantages in investing in NASDAQ 100 are, a) Participating in growth story of most valuable tech giants, b) higher inflation adjusted return. c) mitigate the risk associated with one country and diversify the portfolio globally.
  3. However, the drawbacks associated with NASDAQ 100 are, a) concentrated portfolio (weightage towards tech companies are around 54%), b) high risk high return category c) our limited understanding on US markets & fundamentals of US companies.


Currency Fluctuations

Currency depreciation between two countries is primarily due to the difference in inflation or vice versa. Historically, inflation in India has been around 5%-6% and inflation in US was around 1.5%-2.5. Hence the gap between Indian inflation and US inflation was in INR is also depreciating around 3%-4% against the USD on a 10 year basis.


  1. Overall, long term performance (10 years & 5 years) of Indian equities & Mutual Funds as well as US equities & US Mutual Funds plus rupee depreciation are almost at par.
  2. Going forward, the gap between Indian & US inflation are expected to shrink to 1%-2% and hence, further rupee depreciation is limited. Due to this, we expect lesser arbitrage opportunities, and therefore there may not be requirement to hedge currency risk. RBI & Indian Government’s intention to tame inflation and keeping it low is the emphasize at this point.
  3. Along with inflation, uptick in oil prices are one of the major contributors towards Indian inflation & rupee depreciation. Going forward, the nearer term outlook for oil is around a range of $50 to $75, hence oil is not expected to play a spoilsport here.
  4. Above outlook on inflation and oil prices implies that the future rupee depreciation is limited.
  5. Overall, it is better invest in known markets and Indian equities through the top performing select equity mutual funds, which are a sufficient and sound investment vehicle to fund children’s higher education requirement in US.
  6. Apart from this, there is an outperformance of NASDAQ 100 over US and Indian Indices & Mutual Funds. Investors could consider the allocation towards NASDAQ 100 ETF or FoF depending on their individuals risk appetite, Financial Plan, asset allocation to get better returns with country and currency diversification, and to take advantage of the returns from the Top Tech Global Giants. and investors should opt it if they have clear understanding about dynamics of international markets, NASDAQ 100 ETF and its underlying stocks
  7. IMPT – CAUTION > Historical performance of the NASDAQ 100 ETF may not continue in the future for these tech giants as Facebook, Google and others are facing various legal issues with respect to data & privacy etc. Facebook had to set aside around $3 billion from its earnings towards legal expenses for Q1FY19 pertaining to ongoing investigation by Federal Trade Commission & this amount is 1/5th of their revenue and similarly, Google had to set aside around $1.7 billion from its earnings towards European union fine (this amount is 5% of their revenue). Hence, such similar issues may surely impact the performance of these tech giants negatively in the future and therefore may not get the returns seen in the past.
For More Details Contact :  Mr. Rajanish -  +91 9900130321 |  Mr. Saisri -  +91 9740013581 |  Email -