Indian Rupee continued its upward trend and closed at 65.44 against the US Dollar on March 20 amid bullish overseas investors. In March only, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) have pumped in Rs.17,124 crore (1-17 March) and Rs.34,441 crore (1-20 March) respectively in the Indian equity markets. Appreciation in the Rupee against the US Dollar looks good but for developing countries, looking at exports-driven income, it may be a damaging factor.
Rupee’s success story
Foreign investors turned more hopeful on the Indian commodities and equities after the Bharatya Janata Party’s (BJP) landslide victory in the latest assembly elections strengthened the hope of repeating the Narendra Modi rule in the 2019 Union elections.
On March 15, the domestic currency had closed 16-month high at 65.82 and the Reserve Bank of India (RBI) was seen intervening through state-owned banks that bought US Dollars.
Since the beginning of this year, the Rupee has jumped nearly 4 per cent.
How it can damage your pocket?
According to some analysts, Indian IT companies may see a dip of up to 1 per cent if the Rupee stabilises at Rs.65 against the American currency.
Reshaping IT giants for sustainable long-term growth is a big headache for the industry drivers. In a latest report, IT major Cognizant which has significant operations in India may lay off 6,000-10,000 employees.
The company had a workforce of nearly 2.6 lakh employees as on December 31-2016. The move is part of company’s regular appraisal cycle, according to media reports.
Though the layoff practice is regular in the IT sector and companies do this for their long term profits but gaining Rupee may boost the practice as these exports oriented companies may see a decline in their profits due to higher value of Rupee.
The stock market investors are already noticing the change and thus the IT sector was the lead loser on Monday (March 20) with a dip of 1.4 per cent. Among the major stocks, Infosys, TCS and Wipro lost 1.9 per cent, 1.8 per cent and 1.4 per cent respectively.
Sensex and Nifty indices have jumped nearly 11 per cent this year so far but comparatively the IT sector has registered at growth of 2.6 per cent.
Country’s exports registered a double-digit growth of 17.5 per cent in February but due to uncertainty in Rupee exporters are worried for their future.
Nevertheless, there are two sides of Rupee’s appreciation. Higher-valued Rupee will make the country’s imports cheaper.