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Our Bureau

Mumbai, Sept. 12 The Sensex fell more than 2 per cent on Friday, partly due to the unusual phenomenon of IT stocks declining even as the rupee is depreciating against the dollar.

On Friday, the BSE IT was the largest index loser, falling 4.60 per cent despite the rupee weakening to close at 45.72 to the dollar.

It is the rupee’s recent appreciation against the euro and the pound which will have a negative impact on the Indian GAAP numbers of IT companies, said Mr Gaurav Dua, Head of Research, Sharekhan Ltd: “To make matters worse, the US dollar has been appreciating against the euro and the pound, and when revenues billed in these currencies are consolidated under US GAAP, they will show a dip.”

This twin impact on frontline IT companies would be substantial, as around 30 per cent of their revenues are currently generated from Europe.

Also despite the rupee-dollar depreciation, IT firms are unable to realise the direct benefit. Every IT company hedges its expected revenues through a mix of forwards and options contracts. Generally, the options component constitutes a very small portion of overall hedges and hence companies are not able to reap fully the benefits of a depreciating rupee, said analysts.

International broking firm CLSA said that Infosys might miss its Q2 dollar revenue growth guidance owing to cross currency fluctuations; and that its Q2 revenue guidance should be cut by 17-19 per cent, adding that the dollar rise would hit Infosys’ invoicing in other countries.

This triggered hectic selling in the company’s stock which fell 6 per cent on the BSE. The other big IT losers were TCS (3.34 per cent), Satyam Computer (3.47 per cent), and HCL Technologies (3.68 per cent).

The Sensex closed at 14,000.81, a low last touched on July 22. However, the Nifty fell less, by 1.44 per cent, to 4228.45.

There were other blue chip shares that lost heavily. Reliance Industries fell 3.34 per cent after a fall of over four per cent on Thursday.

Reliance Infrastructure was the biggest Sensex loser, declining 6.32 per cent on the BSE.

FIIs were net sellers in equities for Rs 1,497.67 crore on Friday, and DIIs net buyers for Rs 695 crore.

More Stories on : Stock Markets | Stocks | Forex | Infosys Technologies Ltd

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