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Sectors such as refineries, shipbuilding, fertilisers, consumer durables, and diamonds, gems and jewellery may be the most affected by the rupee's steady decline in recent times.
These sectors spend anywhere between 19 per cent and 51 per cent of their sales on importing raw materials or fuel, a Business Line analysis shows.
The analysis culled out a list of all companies making up the CNX 500 index and assessed their revenue expenses in foreign exchange, according to their last annual report (March 2010-11).
Whether profits of these companies would suffer will depend on whether they are able to pass on the higher cost to consumers. Many sectors are finding this a difficult task, after dealing with cost increases for the last two years.
For example, in the refinery sector, foreign exchange expenditure accounts for more than half of the sales value. Yet, these companies have limited ability to raise selling prices of their fuels to match costs.
Some sectors that rely on imports may get away more lightly than others. These are the ones that have a good ‘natural hedge' in the form of foreign exchange earnings through exports. In the case of the diamonds, gems, and jewellery sector, foreign exchange revenues cover more than three-fourths of foreign exchange expenditure.
But sectors such as fertilisers, ceramic products, consumer durables, and glass which import a lot but export less, have little hedge. These could be more vulnerable to the rupee's depreciation.
Since February, the rupee has lost close to 10 per cent against the US dollar and currently trades at 54.42. While India's worsening economic indicators have played their part in the rupee's latest rout against the US dollar, much blame has been laid on the brewing crisis in the Euro Zone.
With political instability in Greece and speculation high that the country may soon exit the Euro Zone, the euro has been on a tailspin in recent weeks. Consequently, increased risk aversion globally has led investors to flock to ‘dollar safety'. As the dollar turns hot, the rupee has been scalded.
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