Strong rupee to affect oil, pharma

Investors in technology stocks might not be the only ones worried about the appreciating rupee. It could also disturb the pharma stocks' party at the bourses, as the value of their net forex earnings would decline significantly.

The companies in the oil & gas, chemicals, tourism and auto sectors could also see a dip in their net profits as a major chunk of their sales revenues comes in the form of foreign currency.

On the positive side, the media, engineering, construction and oil refining companies are likely to benefit from the rising rupee, according to a report by Credit Suisse, titled "Rupee impact on corporate P&Ls". 

MONEY MATTERS                                      in Rs
Company	Day's Close	Week ago	Price Change
Essar Oil	56.45	57.60	-2.00
Dr Reddy's	703.55	709.60	-0.85
United Phosporous	303.30	330.60	-8.26
BPCL	350.05	333.35	5.01
HPCL	288.65	270.10	6.87
Tata Chemicals	228.65	218.50	4.05

Essar Oil is likely to be hit the most as 98 per cent of its sales comes through net forex earnings, while the country's largest foreign trade enterprise MMTC would benefit the most as the rupee appreciation would translate into lower cost of imports for the state-run company.

MMTC's net forex earnings as a percentage of sales stands at minus 54 per cent.

The report predicted that Dr Reddy's, Divi's Lab, Lupin, Aurobindo and Cipla are likely to take a hit in their net profits, while technology stocks such as HCL Technologies, Tech Mahindra, I-Flex Solutions, Mphasis, TCS, Infosys and Wipro would be losing revenues.

"Software and service exporters are the obvious losers due the gaining rupee. Some pharma majors could also face profit pressure due to the weak pricing power on exported products. The hotels and transportation companies too have adverse exposure, but have much better pricing power to weather the appreciation," Credit Suisse said in the report which saw the impact of the rupee appreciation as sharp and impossible to ignore as cyclical.

Oil companies such as Bharat Petroleum, Hindustan Petroleum, India Oil Corporation, Chennai Petroleum, Petronet LNG and Mangalore Refinery would benefit from the appreciating rupee.

The report said that Container Corporation of India, Adani Enteeprises, HT Media, Zee, United Breweries and Titan Industries could gain. The metal stocks such as Sterlite Industries, Hindustan Copper, Shree Cement and Exide Industries also have less exposure to forex earnings and could therefore surge ahead in the days to come.