A fatigued Sensex staggering near its all-time high could see the much-needed trigger coming from a spurt in share prices of information technology companies as the rupee is expected to weaken against the dollar in the near term, say analysts.
While the broader S&P CNX Nifty of the National Stock Exchange is bettering its peaks, the 30-share benchmark index of the Bombay Stock Exchange has been lagging as shares of infotech companies remained more or less static.
Shares of infotech companies have lacked lustre since April this year, when the rupee started appreciating against the dollar. Infotech companies on the Sensex have a combined weight of 14.93 per cent.
As the Sensex gained 16.76 per cent from 12,455 on April 2, 2007, to 14543.95 on Tuesday, the BSE IT index moved up only by 3.65 per cent. In the same period, infotech stocks in the Sensex — Infosys (up 1 per cent), Wipro (up 3 per cent), Satyam (up 3.8 per cent) and TCS (up 1.6 per cent)-all registered only marginal gains. In the same period, the rupee firmed up from 43.30 to a dollar to 40.52 on Tuesday.
Currency analysts now expect the rupee to slide against the dollar in the near term as the central bank is expected to go slow in its efforts to counter inflation.
“Inflation has started coming down and the rupee is now expected to depreciate against the dollar. It may touch the 43-level in the near term,” says DK Joshi, principal economist with Crisil.
Shares of infotech companies did not participate in the recent rally as a chunk of their revenues comes in dollars and a percentage decline in the rupee could dent earnings by around 50 basis points.
“We are positive on infotech stocks. They have remained weak as a percentage decline in the rupee causes a 40-50 basis points dent in their earnings before interest, depreciation, tax and amortisation (EBITDA). They will bounce back soon,” says Harit Shah, infotech analyst at Angel Broking.