www.rupeedesk.in
Stocks of major information technology companies are seen trading positive next week due to weakness in the rupee, which is expected to boost companies' performances in the near term. The rupee yesterday fell to an over 11-month low against the dollar because of weak macroeconomic fundamentals and several global factors including the gradual strengthening of the dollar globally. So far this month, the rupee has depreciated more than 4% against the US currency. The Indian currency, which ended at 56.49 per dollar yesterday, has traded in a range of 53.00-56.00 per dollar since March. Investors will keep an eye on the draft US immigration bill, which, if implemented, can be a cause of worry for the sector. The Indian IT industry had raised concerns that the draft US immigration bill will push up operational costs of companies deploying foreigners to work there. We believe the US immigration bill, if passed, would disrupt the current Indian IT business model, place it at a competitive disadvantage versus MNCs (IBM, Accenture) and depress margins irrevocably. It has the potential to flatten sector earnings with EBIT (earnings before interest and tax) margin drops of 150-400bps (basis points) across companies. Even if passed in a diluted form.
