The sliding rupee has battered India’s equity markets. Thus, for every IT or pharma sector that has benefitted from the rupee slide, there are sectors that have been adversely affected.
The rupee recovered to 66.55 per dollar on Thursday having touched a low of 68.85 a day earlier.
“The effect of the sliding rupee will be mainly felt on industries that are importing their products. Oil & gas companies that have major imports will be hit,” said AK Prabhakar, senior VP, Anand Rathi Financial Services.
“PSU oil companies (IOC, BPCL, HPCL) will be mainly affected,” said Prabhakar. This is because they import the bulk of their crude oil requirements. However, Cairn India will benefit as it is paid in dollar terms. Reliance Industries will also benefit as it is India’s biggest oil exporter.
“The potential upside for PSU oil companies is capped,” said S. Udasi, senior VP, IDBI Capital Markets. In 2012-13, India’s oil import bill was $160 billion. In the current financial year, that is expected to rise to $200 billion.
“The banking sector will also be affected as most banks have borrowed funds from abroad,” said Prabhakar. IDFC and Axis Bank have large foreign borrowings."Sectors and companies that have large exposure to foreign debt – mainly in the infrastructure and power sectors – will be impacted by the rupee’s slide," said Vikas Inder Jain, assistant VP, Religare Securities.
GMR Infrastructure, and Lanco Infrastructure and Adani Enterprise have huge exposure to foreign currency-denominated debt. So, they will feel the pain of the sliding rupee.
The telecom sector, too, will face some pressure as most of its equipment is imported from Europe or China. “Bharti Airtel has huge borrowings and other companies like RCom and Idea will be also be affected by the rupee slide,” said Prabhakar.
Power companies will also be affected but mainly ones that that import coal. “Adani Power and Lanco will be negatively impacted,” said Prabhakar.
The capital goods sector, which, has a large import bill will not escape unscathed. Since the sector imports a large amount of high technology components, its costs will rise. But in a depressed market, it may not be able to pass on this price increase to user industries. Hence, its profitability will be hit.
“The rupee is so volatile that companies just do not know what to do in such a scenario,” said Udasi.