Refineries, Metals, Fertilisers to Bear Brunt of Rupee Fall: Care

Mumbai: While the sharp rupee fall has helped the IT, pharmaceuticals, textiles and two-wheeler segments, the five most vulnerable sectors are refineries, iron and steel, fertilisers, aluminium and power, rating agency Care said on Tuesday.

The rupee has moved down from Rs 63.61 against the dollar on June 1 to Rs 66.61 on August 24, which is a fall of 4.6 per cent in less than three months, and a loss of 3.9 per cent since end-July.

The daily annualised volatility was 5.1 per cent since June with this level going up in August to 6.7 per cent, the agency noted.

The hardening of the dollar is expected to hit importers as they face the challenge of paying more rupees for dollars which will affect their expenditure and hence profitability, it said.

"Importers do face the challenge of paying more rupees for dollars which will affect their profitability. However, the net impact is more important as several companies/sectors could be having a natural hedge in the form of exports. But others would not be having the same thus leading to additional vulnerability," Care said.

A prudent way to tackle this situation is to hedge these positions, it said, adding that with the forward premium rates being in the region of 7-7.10 per cent for various tenures, corporates may like to eschew such hedging unless the expectation is that the rupee will fall by a greater level.

However, the rupee depreciation is good from the point of view of exports as there are gains to be made in terms of rupee earnings, besides the price advantage to be had in the market, it said.

The rupee has been buffeted by global developments and while the external fundamentals appear to be strong with forex reserves building up to $355 billion, the rupee nonetheless will be guided by external factors.

In FY15, among the various sectors, refining had forex inflows of Rs 2,62,594 crore and outflows of Rs 7,15,141 crore, registering net forex loss of Rs 4,52,547 crore for FY15.

Among other industries, iron and steel was a big looser to the tune of Rs 30,459 crore, fertilisers Rs 18,714 crore, power sector 13,860 crore, oil exploration Rs 8,771 crore and engineering Rs 6,556 crore.

However, the IT sector saw forex inflows of Rs 1,94,767 crore and outflows of Rs 87,188 crore, registering a net forex earning of Rs 1,07,579 core during the past fiscal year.

Among other gainers, the pharma sector gained by Rs 2,8,343 crore, textiles 10,598 crore, two-wheelers Rs 8,721 crore, commercial vehicles/tractors Rs 3,829 crore and metals Rs 3,818 crore, it said.