The falling rupee will hit companies across sectors such as automobiles, FMCG, capital goods, oil & gas, etc., that have large import bills and benefit those in pharmaceuticals and IT that earn a large percentage of their revenues from exports.
Then, companies with large foreign currency borrowings will also take a hit regardless of whether they are focused on the export market, have large import bills or are completely India-focused.
“FMCG is among the worst affected sectors because the rising cost of imported inputs,” said Anand James, assistant general manager, Geojit BNP Paribas Financial Services.
“Over the long term, ITC and Dabur are good bets,” said Ajit Mishra, AVP, Religare Securities.
The metal's sector will be affected. “The devaluation of the rupee will lead to a steep rise in coking coal and other input prices. This will hit profitability,” said Mishra. That's not good news for Tata Steel, Hindalco and other.
Car companies, which have large import bills, will be under pressure, while telecom service providers like Bharti Airtel, which have large foreign currency debts, will also struggle in the short to medium term.
The pharma sector, however, will be a key beneficiary of the devaluating rupee as several leading companies get up to 70-80% of its net revenues from exports.
Wockhardt, which exports 80% of its products, is expected to do well on the bourses as its price has corrected about 50% over the last three months, said G. Chokkalingam, chief investment officer, Centrum Wealth Management.
Like pharma, the information technology sector, too, will be a major beneficiary of the falling rupee. “IT companies will earn more in rupee terms for every dollar of revenues. This will provide a key stimulus to their margins,” said Mishra. On average, most companies in this sector can expect profits to rise 2-3% on account of the falling rupee.
However, Crisil expects clients to renegotiate prices. So, these companies may not benefit fully from the falling rupee.
The declining rupee will have a mixed impact on the capital goods and oil & gas sectors. Both these sectors have large import bills. That will increase costs and put margins under pressure. But companies like L&T in the former sector and RIL in oil & gas, which have large foreign currency incomes, will manage to offset the negative impact.