Why do interest rates matter? They matter because they represent the cost of debt in the economy and that impacts the cost of capital or the rate of discounting to arrive at value of the stock. Like inflation, very high interest rates are negative for equity valuations and very low interest rates are not the sign of a healthy economy. Ideally, you should judge the interest rates based on the level of inflation to ensure that the real rate of interest rates are attractive. What about the level of the rupee versus the dollar? This is a key question to ask; is the rupee weakening or strengthening against the US dollar. The dollar is the benchmark currency for the rupee. A gradually weakening rupee is positive for export oriented stocks in the market like IT, pharma and auto ancillaries. On the other hand, a strong rupee is positive for the import intensive companies like capital goods, power, telecom etc. Weak rupee has a bigger negative connotation for a country like India which imports 85% of its daily oil needs. For India, a gradually and systematically depreciating rupee is the ideal situation. A very sharp fall in the rupee is not a good sign and can lead to sharp foreign portfolio outflows from the equity and bond markets as we saw in 2013 and again in late 2018. Prefer a situation where the currency strong but is gradually losing value in tune with inflation differential. That is the ideal situation for you to take a positive view on investing in the Indian markets. That is called calibrated weakening of the rupee.