In boardrooms across the country, there is one chart that finance professionals are studying closely in the run up to elections. It?s one that traces the movement of the rupee against the dollar every time a new government is sworn in at the Centre.

The analysis has a strong bearing on the fortunes of corporate India, as most of them have substantial foreign exchange exposure. For instance, daily trades on the domestic currency futures market crossed Rs 6,000 crore by Monday from a average of Rs 200 crore just six months ago.

FE analysed the way the rupee behaved after every general elections since 1996. For obvious reasons, we left out the 1991 general elections as it was held in the backdrop of a balance of payments crisis. Also, since RBI followed a pegged exchange rate at that time.

But since 1996, there have four general elections. As the data sets show, the rupee has been battered after every election. This has taken place across all the three political formations assuming office: the Congress-led UPA, BJP-led NDA and the Third Front. Only in 1999 was the effect muted, possibly because the same grouping that had formed the government in 1998 rode back to power. But there were still hiccups.

After every general election, therefore, forex markets have tanked?that too by substantial amounts. The largest drop was after the 2004 elections when the rupee value against the dollar fell by a massive 3.57%. Between May 10 when the results came in and May 17 when the government assumed power, the rupee slipped from 44.37 to a dollar to 45.96.

If one takes the impact on the currency for the spread beginning a month before the actual elections until a month after the elections (usually a 90-day period) the impact is even more substantial. In 2004, the rupee lost 6% against the dollar. As the table shows, in 1996 the rupee went from 33.92 to 35.02 in just a month?a loss of 3.27% and in the 90-day period it lost 4.4%.

Again in 1998, the forex markets tanked from 38.75 to 39.54 in just a month, a loss of 2.04%. In the 90-day period the loss was 3.1%. Even in the 1999 elections, post-Kargil, the rupee fell in the 90-day period by 0.7%.

Forex market analysts were obviously reluctant to comment on specifics. ?You could say traders and industry take cover as a routine precaution before elections, but often the uncertainty is felt more when governments are formed,? said an analyst with a domestic bank.

The trend seems likely to be repeated this time around. June forwards were being quoted at above 50.4 a dollar, which has become a resistance level. That is logical as May futures are now being traded in the 50.3225-50.6725 range.

The stakes for corporates are far higher this time, as gauged by the rapidly expanding size of the currency markets. While industry-wise figures are difficult to ascertain, each company has suffered in the ongoing devaluation of the rupee against the dollar.

Pooja Gupta, CFO with a foreign bank, agreed: ?Companies are doing their balance sheet management heavily (also as a part of AS 11 notification, which has now been extended). Companies in shipping and automobile space are doing the maximum currency hedging to minimise their losses.?