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As rupee hits all-time low of 70/USD, these 6 sectors are seen to benefit the most

The major reasons behind rupee fall are strengthening dollar on recovery in the US economy and Turkish lira losing 28 percent against the greenback in August and more than 40 percent year-to-date.

August 15, 2018 / 01:36 PM IST
 
 
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The Indian rupee hit 70 to the dollar for the first time on Tuesday, falling 15 paise intraday due to sharp depreciation in Turkish lira after the United States imposed tariffs on steel and aluminum imports.

The sell-off in the rupee for couple of days has been so sharp that the Reserve Bank of India may have intervened on Tuesday that helped it recover from intraday all-time low of 70 per dollar to 69.69 but renewed pressure trimmed recovery and finally the rupee settled at 69.90, up 3 paise from Monday's close.

The rupee fell more than 9 percent year-to-date and around 2 percent in August.

Analysts who track currency market said the fall in rupee is on expected lines as currencies across emerging and Asian markets are bleeding against the dollar.

The major reasons behind rupee's fall are strengthening of dollar on recovery in the US economy and Turkish lira losing 28 percent against the greenback in August and more than 40 percent year-to-date.

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"The fall in depreciation is in line with sell-off in other emerging market currencies. The sharp dip in Turkish Lira after US decided to impose tariffs is one of the reasons impacting Indian currency," Devang Shah, Deputy Head-Fixed Income, Axis Capital told Moneycontrol.

Actually the rupee has appreciated and stabilised for last three-four years and after this the fall is warranted as it looks expensive on real basis, he said while expecting RBI's intervention to contain sell-off.

Turkish lira depreciated sharply after the US President Donald Trump doubled tariffs on imports of Turkish steel and aluminum. The fall was also on account of concerns about country's President Tayyip Erdogan showing reluctance to hike interest rates despite rising inflation and a widening diplomatic spat with the United States.

Considering the impact of rupee fall, analysts expect the currency depreciation is always favourable for export-oriented sectors like IT, Pharma, Textile, Speciality Chemicals, PSU Oil and Auto Ancillaries but put margin pressure on sectors like oil marketing companies, coal importers and companies which raise money through external commercial borrowing.

Here are views from Dalal Street experts on sectors which are beneficial and hurt by the rupee fall:-

Siddhartha Khemka, Vice President - Head of Research (Retail)

Exporting companies IT, Pharma, textile and speciality chemicals will be beneficial from the rupee depreciation.

In case of oil, it is a mixed bag. The rupee fall will be favourable for ONGC and Oil India as they sell crude to oil marketing companies in dollar terms. Hence, HPCL, BPCL and IOC will be impacted in margin terms as they buy oil in dollars.

Even some of metals, power and cement companies which are dependent on coal import will also be impacted.

Companies which have high external commercial borrowings will, too, get impacted, which include telecom sector as well.

Astha Jain, Senior Research Analyst, Hem Securities

With rupee depreciation we are positive on sectors like IT & Pharma. Our picks in IT sector are TCS, Mindtree and Tech Mahindra, while in Pharma sector we like Pfizer.

Nitin Rao, CEO, Reliance Wealth Management

If the Indian rupee depreciates further, we might consider select stocks in IT, Pharma and Auto Ancillaries which are export oriented.

Sanjiv Bhasin, EVP-Markets & Corporate Affairs, IIFL

IT and pharma companies generally look as defensive bets whenever the rupee fall but textile and steel stocks which are also export-oriented are likely to outperform.

The overall impact of the rupee will be a mixed bag.

Oil marketing companies don't have hedge, so margin will get hit for these companies as they imports oil.

The fall in rupee is temporary aberration right now. The rupee is near its top and can fall by another 25-30 basis points and not more, given the macros strengthening.

Siddharth Sedani of Anand Rathi Securities

Along with IT and pharma, select textile stocks, consumption and other export oriented companies will be beneficial from this rupee fall.

Importers will be badly hit due to this currency war.

He expects currency to depreciate further if currency war extends.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 15, 2018 01:36 pm
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