Weakening rupee a silver lining for recently downgraded IT sector

IT index may be bottoming out at current levels; fall in rupee can help companies offset some of the cost and growth pressures

The slide in the rupee was expected, given several trends. The USD is hardening as a result of the Fed’s actions. Foreign portfolio investor (FPI) selling continues. While export growth is good, the trade deficit has expanded, due in part to higher energy prices and partly due to a larger general import bill as the economy recovers. A weaker rupee has some benefits especially given that the yuan has dropped in value. It offers some protection against cheap imports and it makes exporters more competitive.

As a consequence, investors will be revaluing export-oriented sectors, which will gain in competitiveness and