While rupees recent fall-out to historic intra-day low of 70.4 has sent jitters to the RBI and it has been pro-active in keeping its further slide under check by aggressively engaging in selling of the dollar currency, the news is not all bad for the Indian economy as a whole. Notably, the dollar selling is not only in light of the rupee's free-fall but also due to 5-year levels reached in respect of India's trade deficit for the month of July.
So, while rupees fall also poses a threat to India's trade deficit due to higher imports than exports and predominantly of crude oil which in recent past has scaled to new peaks. Exports can be improved as now the government can aim to expand its export reach for various goods and services across markets and help to scale down ballooning trade deficit situation.
As a whole, the impact of rupees fall to historic lows on India Inc will depend on the nature of the company's exposure to foreign markets i.e. whether they are engaged in exporting or importing of goods from global markets. And also if they have any borrowings from the foreign shores:
Companies or sectors to profit due to rupee's fall:
Please note that the list entails such conclusions based on net forex earnings of BSE 500 companies in the last three years.
1. Companies who turn out to be net exporters of goods and services, for them the fre-falling rupee will augur well.
2. Companies executing foreign projects
3. Hotel sector with companies such as Indian Hotels that make net foreign earning will gain ground due to falling rupee.
4. Pharma and IT sector considered as defensives during such currency situation will also benefit
5. Medical tourism which also lends foreign earnings will augur well for hospital chains such as Narayana Hrudalaya.
6. Auto, electrode manufactures, steel making companies may also benefit
7. HDFC Bank to fair good in light of net earnings
Sectors or companies likely to underperform given the weakness in the rupee: The sliding rupee is likely to not augur well for some of the below mentioned scrips or sectors:
1. Companies with net foreign outgo or with foreign borrowings will be hurt
2. Net importers of goods and services will also take a hit and the extent of loss will depend on pricing as well as hedging risk adopted by India Inc players.
3. Airline companies such as Indigo and Spicejet have net foreign outgo, same goes for OMCs including OIL, HPCL etc.
4. Other companies with net foreign outgo such as Nestle, HUL will also be affected negatively.
5. Housing finance companies with forex debt such as HDFC, Diwan housing will also suffer
6. Companies importing input material such as Asian Paints. JK Tyres will also be hit with a negative sentiment.