The Hindu Business Line : Rupee gain may hit exporters hard

Mumbai April 16 The sharp appreciation of the rupee by over 5 per cent in the current year is expected to adversely impact the margins of most exporters.

The rupee opened at 42.55/57 and closed at 41.90/91, stronger by about 60 paise against the previous close of 42.51/52 on Friday. "The rupee is over-valued by almost 10 per cent according to the real effective exchange rate. The RBI has also not been actively seen in the market because of inflationary concerns. But this kind of an appreciation of the rupee is not conducive to the export growth of the country," said Dr Rupa Rege Nitsure, Chief Economist, Bank of Baroda.

"Going forward, in an emerging economy an over-valued currency is not good so the central bank is expected to intervene soon to stabilise the rupee," she added.

"One per cent appreciation in the rupee hits the revenues of an export-oriented IT company by one per cent and margins by 30-50 basis points. However, one has to also see how the IT companies have hedged their positions in the market," Mr Krupal Maniar, Research Associate-IT, Emkay Share and Stock Brokers.

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