www.rupeedesk.in
Stocks of major information technology companies are seen rangebound next week on favourable rupee movement, upbeat revenue growth guidance, and on gradual improvement in demand environment. The trend for IT stocks will be positive if they break their important resistance levels.
While the fall in the rupee against the greenback is seen having positive impact on the sector as a whole, volatility remains a cause of concern. Information technology companies are likely to see a positive impact of a depreciating rupee in the short term, even as the fall in currency, which touched its all-time low of 65.56 against the dollar on Thursday, continues to adversely affect the economy as a whole.
Cross-currency movements directly impact the earnings of Indian IT companies, as most large players in the sector get around 80% of their revenues from overseas. Every 1% decline in the value of the rupee is likely to result in 2% growth in profit of information technology companies, given that 15-20% of revenue of most IT companies is hedged.
Mid-sized companies typically outperform when the demand environment improves...there are signs of improving demand environment. The mid-sized companies' margins tend to be more leveraged to revenue pick-up given their smaller scale," said Credit Suisse in a note.
Stocks of major information technology companies are seen rangebound next week on favourable rupee movement, upbeat revenue growth guidance, and on gradual improvement in demand environment. The trend for IT stocks will be positive if they break their important resistance levels.
While the fall in the rupee against the greenback is seen having positive impact on the sector as a whole, volatility remains a cause of concern. Information technology companies are likely to see a positive impact of a depreciating rupee in the short term, even as the fall in currency, which touched its all-time low of 65.56 against the dollar on Thursday, continues to adversely affect the economy as a whole.
Cross-currency movements directly impact the earnings of Indian IT companies, as most large players in the sector get around 80% of their revenues from overseas. Every 1% decline in the value of the rupee is likely to result in 2% growth in profit of information technology companies, given that 15-20% of revenue of most IT companies is hedged.
Mid-sized companies typically outperform when the demand environment improves...there are signs of improving demand environment. The mid-sized companies' margins tend to be more leveraged to revenue pick-up given their smaller scale," said Credit Suisse in a note.
