$ waning, India GDP growth, FII inflows strong: SBICAP Sec

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$ waning, India GDP growth, FII inflows strong: SBICAP Sec

Anil Advani, Head of Research at SBICAP Securities thinks the target of Rs 39.50 to the dollar reached earlier than expected. He said the dollar is weakening and India's GDP growth and FII inflows look strong.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Take Solutions |

Anil Advani , Head of Research at SBICAP Securities thinks the target of Rs 39.50 to the dollar reached earlier than expected. He said the dollar is weakening and India's GDP growth and FII inflows look strong.

According to him fundamentals are strong barring a slowdown in earnings of the BFSI segment. He said in the short-term, rupee appreciation will impact earnings. His top picks are: Take Solutions and Sasken .

Excerpts from CNBC-TV18's exclusive interview with Anil Advani:

Q: Give us an idea of the rupee target 39.50, it was what most people were expecting, but to play out over a much longer period of time. What is the call for the rupee, going ahead?

A: Basically, there are two scenarios. One is the global scenario where the dollar is expected to weaken against all major currencies. In addition, the Fed cutting rates by 50 basis point signals a weakening US economy.

We expect money to move out to emerging markets like India and China away from the US. The other story is the India story where we have an 8% GDP growth. Even if we can continue at 7-8% for next 2-3 years, we would find lot of money pouring in.

We have already seen some Rs 15,000 crore coming in the last few days. We have a target of 39.50 for the rupee, but it has come pretty fast. We expect 39 should be possible by the end of the year.

Q: How do you expect the IT companies to tackle this issue? Give us an idea of your two top picks Take Solutions and Sasken.

A: For IT companies, if the appreciation of the rupee was gradual, it would have been much easier for them. But considering they did some 7 odd percent appreciation in the last quarter, maybe about 2-2.5% this quarter. Sum of the two would make a dent in their '08 numbers. Going forward, they will be able to somehow mitigate and reduce the impact by greater pricing, re-regulation of contracts, by better delivery and better profiling.

So Indian companies have been around for 10-15 years, they have grown into large companies and they would be able to further, over a period of time by higher efficient methodologies. There is no issue there, it's only a question of how fast it happens.

We have seen volume growth and there is no issue of dollar growth either. It's only when you convert the rupee, all these problems come in.

Q: Take Solutions and Sasken: Your call on both?

A: Basically, we are looking at technology companies where there is non-linear growth. The key is to identify companies, which have a span of 3-4 years of continuous growth and a product profile where you do not have to leverage employees to get sales. It is a non-linear growth and having higher margins gives you the comfort factor and gives you the earnings surprise in the product companies. Typically, product companies would be better positioned to mitigate the rupee impact.