RBI might allow further depreciation of rupee; IT, pharma to do well

Commenting on the recent fall which was largely led by liquidity fears, he said that the RBI did manage to calm the markets, but the BFSI space still looks overvalued.

The rupee on Wednesday breached Rs 73/USD to hit a fresh low of Rs 73.40 per dollar on Wednesday, but the weakness is likely to continue, says Saurabh Mukherjea, Founder, Marcellus Investment Managers in an interview with CNBC-TV18.

“While RBI’s action stabalised liquidity conditions in the market, I reckon the RBI might let the currency go down further. With oil steaming up and more liquidity injection from the central bank will lead to some fall in rupee which will be beneficial for IT and pharma,” he added.

CLSA in a note said that a sharp FX windfall is likely to flow through to margins over 2Q-3Q, driving sharp EPS upgrades which could be traded for stronger growth in subsequent periods expanding the competitive advantage.

“In the next 2-3 quarters, I see superb numbers from Indian IT sector because of the currency tailwind and because of the growth seen in the US economy. TCS in the large-cap space and L&T Infotech in the mid-cap space are likely to do very wee,” added Mukherjea.

Commenting on the recent fall which was largely led by liquidity fears, he said that the Reserve Bank of India (RBI) did manage to calm the markets, but the BFSI space still looks overvalued.

Cost of borrowing for second rung investors has risen sharply in the last six and these NBFCs will find very difficult to get money from the banks and wholesale markets.

“I give credit to authorities to calm the panic that was sweeping the market but I don’t think we are out of the woods as challenges will remain for markets in totality and specifically for NBFCs,” said Mukherjea.

Auto stocks, both four-wheeler and two-wheeler space, will face some heat as growth numbers for NBFCs will come down as the lending activity is likely to take a back seat.

"We have to take into consideration the fact that wherever customers were borrowing money from NBFCs and buying two-wheelers, trucks or even cars, electronics etc. will see a slowdown,” he said.He further added that NBFCs are unlikely to grow at a pace seen six months ago. This slowdown will impact the auto, building material sector as well. Hence, Eicher Motors will feel the pinch.

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