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Falling rupee may impact: These stocks that can fetch 10-40% return
The rupee depreciation year-to-date and in last, one month was so sharp that net importers of commodities are likely to hit badly as they have to shell out more money to buy their products.
Rupee depreciation is likely to hit badly net importers of commodities as they have to pay more to buy raw material or finished products. On the contrary, exporters will definitely be major beneficiaries.
More the exposure to imports, severe the impact of rupee fall. One of the sectors that may be impacted is chemicals and agrochemicals, but IIFL feels the impact will not be the same for all. While exporters can pass on to customers the cost advantage of rupee fall, in case of importers which can't pass on import cost, the pressure can likely go beyond FY19.
The research house said FY19 earnings are likely to be clouded by hedging losses and debt revaluation, so it focuses on earnings for FY20, by when the recurring impact on earnings should become more visible.
It feels INR depreciation will impact not only: 1) ‘core’ trade earnings (i.e., those arising from exports and imports), but also lead to 2) hedging gains/losses, 3) revaluation of foreign currency borrowings and 4) revaluation of monetary items on the balance sheet.
However, the last three items (Bayer, Coromandel, and GSFC) will have a one-time impact on reported financials (in FY19), whereas only the core earnings impact will sustain through FY20 and beyond, IIFL said.
UPL will likely derive more than 85 percent of its revenues from outside India by FY20, post the Arysta acquisition, and hence could also see the substantial benefit, it said, adding Atul has demonstrated significant leverage to the INR in the past.
It believes Navin Fluorine and SRF should also benefit more modestly. Tata Chemicals' overseas soda ash business gives it some advantage, while Rallis is a marginal net exporter while PI Industries’ custom synthesis typically passes on INR movements to customers, and so should remain relatively unaffected, it said.source- www.moneybhaskar.com
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