NEW DELHI: Brokerage firm CLSA has said in a report that the rupee depreciation will benefit the Indian IT industry by way of a 200-300 bps margin improvement over the second half of FY12. The report further added that Infosys is better placed to ripe this gain.
"Infosys is our preferred pick to play the rupee weakening theme amid an overall cautious stance on tech stocks," said CLSA in a sales note.
The brokerage firm has upgraded India's No. 2 software services exporter Infosys to 'outperform' from 'underperform', saying the company is best placed to capitalise on the weak rupee with a target price of Rs 3080.CLSA said while cautious view on Indian IT stocks stays, a reset of currency assumptions is driving a 2-13 percent upgrade of fiscal year 2012/13 earnings per share for Tier-1 technology stocks.Current market dollar revenue forecasts continue to face downside risks ahead. However, a benign currency environment should ensure solid margin defence.The brokerage firm suggested unlike other export-oriented sectors like textiles, jewellery, among others, IT services exports have little competition from other low cost offshore destinations which precludes snatching of market share on the basis of increased competitiveness.
Hence, even if the rupee were to stabilise around the 55-60 mark, it is unlikely to result in any material expansion.
Rupee Depreciation:
The rupee remained under pressure especially in the last quarter of 2011 and posted its biggest annual fall since 2008 on account of higher current account deficit, constant selling by foreign institutional investors and uncertain global economic outlook.
Margin of companies with substantial foreign debt on their balance sheets will get impacted with the rupee depreciation as their cost of servicing the debt will increase, thus putting further pressure on their margins.
Rising interest costs and marked-to-market losses on foreign debt and derivatives will increase due to the depreciation of the rupee.
The rupee depreciated nearly 16% in 2011. It slipped to a record low of 54.30 on Dec 15, after which the RBI imposed curbs on banks' trading limits to help rein in speculation on the currency.Brokerage firm CLSA expects the rupee to depreciate further to around 58/US$ or a 9% depreciation over the next 12 months. "We expect India's current account deficit problems to continue unless capital inflows (FDI, portfolio flows) improve or oil corrects significantly," added the report.In a report, Royal Bank of Scotland suggested the rupee will remain a regional underperformer in 2012 due to the country's fragile external position.
"July-September FY12 external data underscores our longstanding view that the rupee would remain a regional underperformer in 2012," RBS said in a note on Monday.
The size of the current account deficit, short term external debt and the high share of portfolio capital and external borrowings in external reserves highlight a fragile external position, RBS said.
(Source- http://economictimes.indiatimes.com/)
"Infosys is our preferred pick to play the rupee weakening theme amid an overall cautious stance on tech stocks," said CLSA in a sales note.
The brokerage firm has upgraded India's No. 2 software services exporter Infosys to 'outperform' from 'underperform', saying the company is best placed to capitalise on the weak rupee with a target price of Rs 3080.CLSA said while cautious view on Indian IT stocks stays, a reset of currency assumptions is driving a 2-13 percent upgrade of fiscal year 2012/13 earnings per share for Tier-1 technology stocks.Current market dollar revenue forecasts continue to face downside risks ahead. However, a benign currency environment should ensure solid margin defence.The brokerage firm suggested unlike other export-oriented sectors like textiles, jewellery, among others, IT services exports have little competition from other low cost offshore destinations which precludes snatching of market share on the basis of increased competitiveness.
Hence, even if the rupee were to stabilise around the 55-60 mark, it is unlikely to result in any material expansion.
Rupee Depreciation:
The rupee remained under pressure especially in the last quarter of 2011 and posted its biggest annual fall since 2008 on account of higher current account deficit, constant selling by foreign institutional investors and uncertain global economic outlook.
Margin of companies with substantial foreign debt on their balance sheets will get impacted with the rupee depreciation as their cost of servicing the debt will increase, thus putting further pressure on their margins.
Rising interest costs and marked-to-market losses on foreign debt and derivatives will increase due to the depreciation of the rupee.
The rupee depreciated nearly 16% in 2011. It slipped to a record low of 54.30 on Dec 15, after which the RBI imposed curbs on banks' trading limits to help rein in speculation on the currency.Brokerage firm CLSA expects the rupee to depreciate further to around 58/US$ or a 9% depreciation over the next 12 months. "We expect India's current account deficit problems to continue unless capital inflows (FDI, portfolio flows) improve or oil corrects significantly," added the report.In a report, Royal Bank of Scotland suggested the rupee will remain a regional underperformer in 2012 due to the country's fragile external position.
"July-September FY12 external data underscores our longstanding view that the rupee would remain a regional underperformer in 2012," RBS said in a note on Monday.
The size of the current account deficit, short term external debt and the high share of portfolio capital and external borrowings in external reserves highlight a fragile external position, RBS said.
(Source- http://economictimes.indiatimes.com/)
No comments:
Post a Comment