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    • The positive side of rupee depreciation

    Publish date: 05th October, 2018

    The rupee fell to a yet another record low against the US dollar. The fear of ever-rising oil prices continues to hurt the currency market sentiment. Since India imports over 80% of the oil requirement, the rupee is expected to witness a wobble. With interest rates rising in the US, there would be an inherent strength in the US dollar. This, too, does not help the Indian rupee. However, not all news is bad news in the rupee story. The month-on-month retail and wholesale inflation data is not showing any substantial run-up. Share prices of export-oriented companies are on the run up since January 2018.

    The Indian rupee has shed over 9% since April 2018. Shares of export-oriented companies like IT services and Pharma sector have gained ground as a result.

    Click here to read more about rupee depreciation.

    Here are a few positive takeaways on rupee depreciation for investors.

    IT stocks shining

    Information technology (IT) industry is on the path of accelerated growth. The main reason for this is that the IT industry is majorly export-oriented. The fall in the value of rupee against US dollar has added to the improved growth environment. However, the benefits of rupee depreciation vary across different companies. Many large-cap and mid-cap IT Company stocks have outperformed based on their valuations.
    Click here to read more about the growth in the Indian IT industry.

    The September 2018 quarter results are likely to show that the top tier IT companies will grow revenue and profit at a brisk pace. Deal closures and wins have picked up for IT companies, which augurs well for growth, according to our analyst.

    Crisis: An opportunity?

    India’s Q1 GDP growth data has shown improved growth of the Indian economy. Further, the IMF and the World Bank have predicted the Indian economy to grow at over 7% in the current financial year. There is encouraging news as overall industrial production has also shown signs of an improvement. The government has also said recently that it would rein in the borrowing and stick to the fiscal deficit target for the financial year 2018-19. So, if one leaves the current account deficit, negative signs on other parameters are not ominous or worthy of any panic. With profit growth across businesses slated to improve over the next two years, any sharp decline should be positive for long-term investors.

    Click here to read more about the impact of rupee depreciation.

    What are quality stocks

    Recently, the news has been flooded with rupee depreciation headlines. This has made many investors panic. As the market indices witness a downward slope, investors tend to close out their positions at whatever price they get. However, there could be opportunities during the volatile market situation. You may get quality companies at a reasonable value. Besides IT services, companies that export generic drugs and earn substantial revenue through exports are already finding favour among investors. You can also look at companies that depend entirely on the consumption in rural or urban India or have less or zero debt. There are times when the panic in the market makes such companies attractive.

    Click here to read more about things you can do when markets are volatile.

      • Stocks witnessing action in October series   Read more

      • Is the falling rupee a cause of concern?    Read here

    Disclaimer: Investments in securities market are subject to market risks, read all the related documents carefully before investing. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. By referring to any particular sector, Kotak Securities Limited does not provide any promise or assurance of favourable view for a particular industry or sector or business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and take professional advice before investing. Such representations are not indicative of future results. Click here for the detailed disclaimer.