The spectacular rally in the rupee over the last few days, marking a reversal in trend as the worst-performing currency in Asia until last week, is likely to put pressure on the stocks of software services exporters considering their valuations have topped multi-year highs, An Economic Times report said.
The impact of gains in the local currency will depend upon the nature of foreign exchange hedging strategies adopted by the companies and their business fundamentals.
Infosys, traditionally the most conservative on hedging strategies, is expected to be relatively less impacted.The sharp depreciation in the rupee against currencies such as the dollar, the euro and the pound helped boost valuations of these companies. Until last week, the rupee had depreciated by over 16% in the two months ended August.
A 1% drop in the currency boosts the operating margin of IT exporters by 30-40 basis points.
Read the complete report here