Mutual Funds:Is the rupee fall benefiting your investments?

The exchange rate woes do not seem to abate and there are new challenges cropping up with every passing day with even the RBI intervention seemingly not helping. In spite of the obvious grey clouds, it is possible to spot a few benefits panning out of the rupee's great fall.

Benefiting sector themes: There are few sectors which tend to benefit out of the rupee's weakening position. Technology which derives over 60%-65% of its revenues from the US markets would stand to benefit the most. Although, there has been no significant improvement in the project budgets that were declared during the beginning of the calendar year, the companies stand to benefit from the exchange rate movement. Export oriented industries such as textiles, gold jewelry, gems, diamonds etc., could also stand to benefit from the current situation. However, one needs to thoroughly check the export / import patterns of the companies. There are a lot of companies in the above sectors which primarily cater to the domestic requirement and others who import raw material from overseas. Pharmaceutical companies are yet another beneficiaries. They typically draw down a lot of revenue from overseas. The size of the Indian pharmaceutical industry is $20 billion, or Rs 1 lakh crore, with exports accounting for $9 billion, or Rs 45,000 crore. Other similar sectors include ones with niche business models like aquaculture and agri-products (export based) which would benefit strongly during such turbulent times. A quick look at some of the mutual funds with the sector theme indicates that there is no definite pattern that one can deduce. However, over the short term, the benefit of falling rupee is reflected in the performance of the BSE IT index and funds with IT sector as their underlying theme. These specific funds seem to have outperformed the broader index.