时间：2022-10-29 07:06:23
Have you heard of companies by the name of Avanti Feeds and Waterbase? Or better still, did you buy their shares in August 2011? If yes, you made good gains in a period the market was on a downward spiral.
Between August 1, 2011, and December 30, 2011, the Sensex slid 15.6% to 15,455. However, Avanti Feeds and Waterbase shares rose 215% from Rs 39 to Rs 123 and 88% from Rs 8 to Rs 15, respectively.
So, what do these companies do and what made their stocks tick? Well, both are from the aquaculture sector, and being export-oriented gained from the depreciation of the rupee.
“Export-oriented sectors benefit from rupee depreciation. These include software services, pharmaceutical and aquaculture. However, there will be limited gains for engineering goods and gems and jewellery sec-tors as they import raw materials,” says Anand Tandon, CEO, JRG Securities.
“Information Technology (IT) and pharmaceutical companies will benefit as they are export-focused,” says David Pezarkar, head, equities, Daiwa Asset Management.
When rupee depreciates, exporters get more for each dollar of sale proceeds. It fell 21% to 53.26 per dollar between August 1, 2011, and December 30, 2011. Market experts say it may fall further.
“The rupee is the worst performer among emerging market currencies. It is likely to test the 55 level,” says Shrikant Chouhan, head, technical research, Kotak Securities.
“While the rupee is expected to remain under pressure in the short term, it is likely to move in a narrow range before strengthening in the later half of the year as economic growth improves,” says Daiwa’s Pezarkar.
While exporters gain from rupee depreciation, a strengthening rupee benefits companies that rely on imports. We analyse what it means for the different sectors.
Smooth Drive
Information Technology: The IT sector earns around $60 billion a year from export of software and services. From August 16, 2011, to December 31, 2011, the Bombay Stock Exchange (BSE) IT index outpaced the Sensex. The Sensex fell 7% to 15,455 but the IT index surged over 13% to 5,752.
“A falling rupee increases the margins of export-oriented sectors. The progress in the next six months will depend on the rupee. If it slides towards 60, as is widely believed, the IT index may rise another 10-15%” says Kishor P Ostwal, chairman and managing director, CNI Research.
Amar Ambani, head of research, IIFL, is also upbeat. “Despite concerns in Europe and the US, the demand held up, as seen in second quarter results, especially for the Tier-1 players. Rupee depreciation is expected to help earnings.”
Infosys, Wipro and Tata Consultancy Services rose 16% to Rs 2,765, 17% to Rs 399 and 19% to Rs 1,161, respectively, between August 16, 2011, and December 30, 2011.
A PINC Research report says the business environment remains uncertain. Also, there will be pressures of lower IT spending and dollar revenue growth in 2012-13. Volume growth for Tier-I IT companies is likely to be 12-15%. However, a weakening rupee would limit the impact, it said.
Experts are positive on heavyweights. Prabhudas Lilladher says Infosys, Wipro and TCS can test Rs 3,090, Rs 410 and Rs 1,230 levels, respectively, in the next couple of months. On January 16, 2012, they were trading at Rs 2,634, Rs 407 and Rs 1,107, respectively.
Pharmaceutical: The size of the Indian pharmaceutical industry is $20 billion, or Rs 1 lakh crore, with exports accounting for $9 billion, or Rs 45,000 crore. Many domestic companies such as Lupin, Sun Pharmaceutical and Dr Reddy’s Laboratories have high exposure to the west.
“A depreciating rupee has a mixed impact on the sector. Highly export-oriented companies gain. If the rupee falls further, Divi’s Laboratories, Glenmark Pharmaceuticals and Dr Reddy’s Laboratories can rise,” says Sudip Bandhyopadhyay, managing director and CEO, Destimoney Securities.
Some differ. Gargi Deb, research analyst, Microsec Capital, says, “The rupee depreciation may not benefit export-driven pharmaceutical companies which have taken forward covers to hedge the currency risk. Cipla and IPCA Laboratories have some unhedged positions and so may marginally gain from the rupee depreciation.”
“The BSE Healthcare index fell due to foreign exchange losses suffered by the companies. Otherwise, the sector is doing well. But if the market continues to fall along with the rupee, there may be a profit-taking round in their stocks,” says Kotak’s Chouhan.
Between August 19, 2011, and December 30, 2011, Lupin, Sun Pharmaceutical and Dr Reddy’s shares rose 2.7% to Rs 447, 6.3% to Rs 496 and 12% to Rs1,577, respectively, as the rupee fell 20%. The BSE Healthcare index rose 35.45 points, or 0.60%, to 5,870 .
Aquaculture: India exported 3.13 lakh tonnes marine products worth Rs 6,679 crore, or $1.4 billion, in April-September 2011. Compared to this period a year ago, there was 0.12% growth in volume, 19.91% in rupee earnings and 23.01% in dollar earnings. This shows that the weakening rupee helped Indian seafood exporters. During the first nine months of financial year 2011-12, Avanti Feeds and Waterbase surged 240% to Rs 123 and 269% to Rs 15.85, respectively.
Avanti Feeds manufactures shrimp feed. During the quarter ended September 30, 2011, it registered a 524% rise in net profit. Frozen shrimp continued to be a major export, accounting for 58.41% earnings in dollar terms. Shrimp exports rose 19.34% in quantity, 32.90% in rupee and 36.74% in dollar terms.
Waterbase operates a fishery. It registered a profit of Rs 2 crore in the quarter ended September 30, 2011, as against a loss of Rs 63 lakh in the same quarter last year.
“Floods in Thailand helped these companies. They have a high export thrust, so a weakening rupee is an advantage for them,”says Alex Mathews, research head, Geojit Paribas Financial Services. He is bullish on the sector for the medium term due to the possibility of further weakening of the rupee.
Bumpy Ride
Market experts say companies that are net importers are likely to be hit. Those that have unhedged external borrowings may also face the heat. For example, oil marketing companies (OMCs) now have to pay more rupees to buy crude oil in the international market. They suffer further because they don’t have the freedom to increase retail prices.
“Companies which import substantial inputs will have to sacrifice margins,” says Pezarkar of Daiwa Asset Management.
Capital Goods: The capital goods sector was under a lot of pressure in 2011 with the result that the BSE capital goods index fell 47% to 8,068 between January 2011 and December 2011. There has been a marked slowdown in order inflows, and with interest rates rising, projects are either being postponed or shelved.
Milan Bavishi, head research, Inventure Growth and Securities, says, “The sharp rupee fall has made the situation worse. A weakening rupee has a direct impact on manufacturing companies for two reasons. First, Indian companies are net importers. Second, they have loans and claims to international banks and will either have to pay more to settle the loans or refinance the debt with high-cost local loans.”
Rikish Parikh, vice president equities, Motilal Oswal Financial Services, seconds Bavishi. “A weakening rupee would have partially affected the sector as companies in India depend on technical knowhow from abroad. Also, although prices of metals on the London Metal Exchange have fallen, the companies here have not benefited because of the weakening rupee.”
Oil Marketing Companies: Share prices of oil marketing companies (OMC) declined 45-50% between September 2011 and December 2011 as margins contracted due to higher input costs. The recent rupee depreciation has added to the woes of Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL). For instance, the IOC stock fell 45% from Rs 456 in September 2010 to Rs 247 in December 2011. HPCL fell 55% and BPCL 45%.
OMCs are struggling due to large under-recoveries in diesel, kerosene and LPG as they have to sell these fuels at subsidised prices.
“The companies have urged the government to offset losses and are taking steps to cut cost and improve productivity. The additional cost of importing crude oil due to weakening rupee without a corresponding increase in retail prices has put a strain on them,” says Rakesh Goel, head, marketing and distribution, Bonanza Portfolio.
Market experts say the fall in crude oil prices from $115 to $104 per barrel in recent months has partially offset the impact of the weakening rupee. Goel of Bonanza says the rupee may not weaken further.
Expert Advice
As the market is edgy, experts are advising a stock-specific and long-term approach. “In the present situation, we advise investors not to be sector-specific but stock-specific. Investors should choose companies that have strong balance sheets, healthy product pipelines and a track record of good performance,” says Deb of Microsec Capital.
Nilesh Shetty, associate fund manager(equity), Quantum Asset Management Company, says, “Investors should focus on longer trends rather than worry about short-term events. The nature and evolution of a company’s business, the quality of its management, its valuation and competition in faces are factors that investors must keep in mind.”
Also keep an eye on the rupee if you are planning to invest in stocks in the rupeesensitive sectors.
Index Moves
Sectors impacted by the rupee movement