Purchasing power parity

The theory that exchange rates should adjust so that the same basket of goods costs the same everywhere.

In its relative form, a currency whose economy runs 5% inflation against another's 2% should depreciate about 3% a year. From ₹83, that implies about ₹85.4 after a year.

Over short horizons capital flows and rate differentials dominate, and the theory fails. It works loosely over decades, and decades are the horizon a long-term investor cares about.

Use it for direction, never for a level.