Falling Rupee’s Zero Sum Game: Loss For One Is Gain For Another

A bank staff member hands Indian 500 rupee notes to a customer on November 24, 2016, in the wake of the demonetisation of old 500 and 1000 rupee notes in Mumbai. (INDRANIL MUKHERJEE/AFP/Getty Images)

Indian currency Rupee, which has fallen by more than eight per cent in this financial year, may have caused a headache for the import dependent firms of India, but it can prove to be a blessing in disguise for other parts of the Indian industry. Indian IT firms are working in a competitive operating environment and thus face margin pressure, falling Rupee can prove to be a boon for this industry, reported Business Standard.

According to Market experts, margin of profits will get supplemented with strengthening dollar as the companies will get more value in Indian Rupees. The gains, however, will not be uniform across the companies as the hedging companies do will determine the gain in foreign exchange that they make.

Indian IT Companies generally hedge 30 per cent of the total receivable bills.

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"Certainly, falling Rupee will help all exporters including the IT services firms. But, the extent of benefit that will be accrued will depend on the onshore and offshore business mix of individual companies," said Jatin Dalal, Chief Financial Officer of Wipro.

The sharp fall in rupee is mainly due to the concern over increasing crude oil prices and thus rising current account deficit.

"Recent Rupee depreciation will definitely mitigate a lot of headwinds faced by the domestic IT firms. Also, these firms may witness cross-currency boost owing to strengthening of dollar against all major currencies," said Sanjeev Hota of Sharekhan.

Firms like TCS, Infosys, and HCL are the most likely IT firms to benefit due to their exposure to United States and dollar billing.

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