Views on Impact of Rupee Depreciation on IT & Pharmaceuticals - Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - Pharma & IT, Angel Broking)

Impact of Rupee Depreciation on IT & Pharmaceuticals:

"The Rupee has constantly been depreciating vis-a-vis Dollar and Euro. The Rupee in FY2016, so far has depreciated by ~5.7% and ~3.3% vis -a- vis Euro and dollar respectively. The overall depreciation will be beneficial for the IT and Pharmaceutical sectors, which are net exporters. While both sectors are equal beneficiaries of the trend; we believe that IT which has higher net export of the range of 40-50% will be a major beneficiary of the same, followed by Pharmaceuticals; though the exact benefit for per 1% depreciation on bottom-line can't be forecasted as all companies have a different composition of US/Euro and other currency mix. However, as per companies, we believe that large caps, which are more focused on Europe and US, will show more benefits from the current depreciation, most of them have around 70-80% sales from these regions. Moreover, while we are not sure whether the trend will flow into FY2017, we believe that IT stocks are well poised and are not factoring in much benefit from such depreciation, and trading at around 14-19xFY2017E earnings , while Pharmaceutical sector trades at 25-27xFY2017E PE multiple on an average. Thus Pharmaceuticals are even after factoring the currency benefit will be just fairly valued; whereas IT sector could see some upgrades in case the trend moves into FY2017. So we maintain our BUY on IT stocks like-Infosys, TCS, Tech Mahindra, Wipro, HCL Tech."

Source : Equity Bulls

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