Variation in value of the US dollar is always a big deal for the world market. The expectation of the dollar to get stronger is going to affect the Indian market on both-side. Indian IT industries, such as HCL Technologies, Wipro, Tata Consultancy Services (TCS) and Tech Mahindra, which provide software services to the US, will be benefitted. Whereas, other services such as the rising price of oil will affect the non-IT industries against them.
According to the last update by The Economics Times, The Indian rupee inched nine paisa higher to 72.20 against the US dollar on Monday, tracking the weakness of the American currency in the overseas market, amid a lacklustre trend in the domestic equity market. However, according to the recent foreign exchange rate, the Indian rupee value has raised to 72.522502 Indian rupees. Thus, today for one dollar you get 72 rupees 52 paisa.
Recent performance of Tech Mahindra, specifically, its latest achievement on Hyderabad-based Perigord, makes it one of the best performing stock amidst IT peers.
According to reports, where US President, Joe Biden, has signed the country’s $1.9 trillion stimulus package into law and is hoping that this initiative would help impel the growth. But, where there is growth, there is also inflation. Therefore, to counter the inflation, the central bank needs to interrupt and increase the interest rates.
The rate hike of the dollar is certainly going to make the Indian currency weaker. The impact will be revealed on the abundance of Indian companies which either earn a large chunk of their revenues in dollars, or import key raw material. India is a major importer of crude oil. The hike will make the crude oil more expensive. And it would have a negative impact on the productivity of the oil importers and Indian refineries such as IOC, HPCL and BPCL and would further damage a whole lot of the other related businesses as well.
On the other hand, the positive aspect is that certain software companies, which export software services, will get better earnings in rupee terms. And for this reason, the odds of a rate hike in the US rise, so will the forecast for companies like TCS, HCL Tech, Infosys, Wipro and Tech Mahindra.
Apart from IT industries, Pharma companies in India are also major exporters of goods and services and are expected to receive most of their revenue in US dollars. India is considered to be one of the biggest suppliers of generic medicines worldwide. Some of the pharmaceutical exporter companies in India that are leading the field are JoinHub Pharma, Sun Pharmaceutical Industries, Cipla Limited, Dr Reddy’s Laboratories, Aurobindo. India has one of the most minimal manufacturing costs in the world. It is lower than almost half of Europe and the USA. Hence, it brings immense exposure to export the products and services.
Therefore, Indian market is expected to be a huge platform for the predicted strengthening of the US dollars, which would certainly have both positive as well as negative impact.
