PRESENTED BY
• NAETHRA GOWRI T
• SHOBANA R
• JEGADEESHWARI R
• SINDHU G
SYNOPSIS
 Currency depreciation
 Effects of rupee depreciation
 Causes of rupee depreciation on Indian economy
 Impact...
CURRENCY DEPRECIATION
 Currency depreciation is the loss of value of a country's
currency with respect to another country...
AVERAGE ANNUAL EXCHANGE RATE FOR RUPEE
AGAINST DOLLAR
HISTORICAL INDIAN RUPEE RATE (IND USD)
Year INR/USDYear INR/USD Year...
Effect on If Rupee DEPRECIATES
US$-INR moves
from Rs. 60/- to Rs. 65/
If Rupee APPRECIATES
US$-INR moves
from Rs. 60/- to ...
CAUSES FOR RUPEE DEPRECIATION
 Widening current account deficit
 Low forex reserves: Enough to cover imports of only sev...
IMPACT OF RUPEE DEPRECIAITON ON INDIAN
INDUSTRIES
 Information industry
 Pharmaceutical sector
 Energy sector
IT INDUSTRY
 The IT industry contributes 7.5% to India's GDP in 2012.
 The industry has been growing at compounded annua...
CNX IT INDEX
 The CNX IT Index represents about 13.69 % of the free float market
capitalization of the stocks listed on N...
CNX IT INDEX
CMC Ltd. NIIT Technologies Ltd.
CORE Education & Technologies Ltd. Oracle Financial Services Software Ltd.
Fi...
TREND OF CNX IT INDEX AND
VALUE OF INR AGAINST USD
45
50
55
60
65
70
75
5000
6000
7000
8000
9000
10000
11000
CNX IT Index ...
400
600
800
1000
1200
1400
1600 Jan/12
Apr/12
Jul/12
Oct/12
Jan/13
Apr/13
Jul/13
Oct/13
Jan/14
HCL
2100
2600
3100
3600
Jan...
IMPACT OF RUPEE DEPRECIATION ON IT INDUSTRY
 Depreciation of rupee’s value provide short-term benefits but in the long-
r...
PHARMACEUTICAL INDUSTRY
 Pharmaceuticals sector is one of the key sectors where Indian companies have
created a global br...
COMPANIES (CNX PHARMA INDEX)
The CNX Pharma Index represents about 5.34% of the free float market
capitalization of the st...
45
50
55
60
65
70
4500
5000
5500
6000
6500
7000
7500
8000
CNX PHARMACEUTICAL INDEX
CNX Pharma Dollar rate
http://www.nsein...
http://www.moneycontrol.com/stocks/hist_stock_result.php?ex=N&sc_id=GI&mycomp=G
laxoSmithKline%20Pharmaceuticals
250
350
4...
IMPACT OF RUPEE DEPRECIATION ON PHARMA INDUSTRY
 The Indian pharmaceutical industry imports more than 75 % of raw materia...
CONTD…
 Profitability of companies is also affected by loans they owe in foreign
currency. Higher Dollar conversion rate ...
ENERGY SECTOR
 India has become one of the largest energy intensive countries
in the World.
 In 2011-12, India was the f...
CONTD..
 Due to India’s economic rise, the demand for energy has grown at an
average of 3.6% per annum over the past 30 y...
IMPORTS
http://mospi.nic.in/mospi_new/upload/Energy_Statistics_2013.pdf?status=1&men
u_id=216
http://www.eia.gov/countries/analysisbriefs/India/images/crude_oil_imports.png
COMPANIES (NSE CNX ENERGY INDEX)
1. Bharat Petroleum Corporation Ltd.
2. Cairn India Ltd.
3. GAIL (India) Ltd.
4. Indian O...
TREND OF CNX ENERGY INDEX AND VALUE
OF INR AGAINST USD
45
48
51
54
57
60
63
66
69
6500
7000
7500
8000
8500
9000
energy Dol...
240
260
280
300
320
340 Jan/12
Apr/12
Jul/12
Oct/12
Jan/13
Apr/13
Jul/13
Oct/13
Jan/14
ONGC
200
250
300
350
Jan/12
Apr/12
...
IMPACT OF RUPEE DEPRECIATION ON ENERGY SECTOR
• A sharp decline in the value of the rupee will affect the power generation...
 NTPC Ltd and Power Grid Corp. of India Ltd had around 30% of their
FY13 (year-end March) debt in foreign currency and ha...
CONCLUSION
 The major reasons for rupee depreciation are slow economic growth rate, weakening
capital inflows and widenin...
THANK YOU
Upcoming SlideShare
Loading in …5
×

Rupee depreciation and its impact on indian industries

593 views

Published on

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
593
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
24
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Rupee depreciation and its impact on indian industries

  1. 1. PRESENTED BY • NAETHRA GOWRI T • SHOBANA R • JEGADEESHWARI R • SINDHU G
  2. 2. SYNOPSIS  Currency depreciation  Effects of rupee depreciation  Causes of rupee depreciation on Indian economy  Impact of rupee depreciation on the Indian industries  IT sector  Pharmaceutical sector  Energy sector  Conclusion
  3. 3. CURRENCY DEPRECIATION  Currency depreciation is the loss of value of a country's currency with respect to another country’s currency. Let us assume 1$ = 1 Rupee Americans own $100 and the Indians own Rs.100 If India buys or imports Rs. 5 worth of product from USA then India would have Rs. 95 and USA would have $105 USA is 10.52% wealthier now $ 1 = Rs. 1.10
  4. 4. AVERAGE ANNUAL EXCHANGE RATE FOR RUPEE AGAINST DOLLAR HISTORICAL INDIAN RUPEE RATE (IND USD) Year INR/USDYear INR/USD Year INR/USD Year INR/USD 1973 7.66 1984 11.36 1995 32.43 2006 45.17 1974 8.03 1985 12.34 1996 35.52 2007 41.20 1975 8.41 1986 12.60 1997 36.36 2008 43.41 1976 8.97 1987 12.95 1998 41.33 2009 48.32 1977 8.77 1988 13.91 1999 43.12 2010 45.65 1978 8.20 1989 16.21 2000 45.12 2011 46.61 1979 8.16 1990 17.50 2001 47.23 2012 53.34 1980 8.89 1991 22.72 2002 48.62 2013 58.24 1981 8.68 1992 28.14 2003 46.60 1982 9.48 1993 31.26 2004 45.28 1983 10.11 1994 31.39 2005 44.01 http://www.rbi.org.in/scripts/ReferenceRateArchive.aspx
  5. 5. Effect on If Rupee DEPRECIATES US$-INR moves from Rs. 60/- to Rs. 65/ If Rupee APPRECIATES US$-INR moves from Rs. 60/- to Rs. 57/- Importers IMPORTS BECOME COSTLIER for each USD importer have to pay Rs 5/- more IMPORTS BECOME CHEAPER for each USD importer have to pay Rs. 3 less Exporters EXPORTERS EARN MORE REVENUE For each Dollar, the exporter will get Rs. 5 more EXPORTERS EARN LESS For each dollar, now the exporter will get Rs. 3 less.
  6. 6. CAUSES FOR RUPEE DEPRECIATION  Widening current account deficit  Low forex reserves: Enough to cover imports of only seven months.  Growth slowdown: India's GDP growth fell to a decade low of 4.7% in 12-13.  Fiscal deficit: (government expenditure >tax revenue)  Dependence on foreign money - Withdrawal of money by overseas investors is leading to the weakness in the rupee.  Recovery in the US: The slow but steady recovery in the US is making USD stronger against other currencies.  Stimulus withdrawal: Indications that the US may withdraw or ease the fiscal stimulus package could potentially put the brakes on funds for developing economies. http://profit.ndtv.com/news/cheat-sheet/article-10-reasons-why-the-rupee-is-sinking-every-day-326160
  7. 7. IMPACT OF RUPEE DEPRECIAITON ON INDIAN INDUSTRIES  Information industry  Pharmaceutical sector  Energy sector
  8. 8. IT INDUSTRY  The IT industry contributes 7.5% to India's GDP in 2012.  The industry has been growing at compounded annual growth rate (CAGR) of 17 per cent during 2007-12.  The industry has provided direct employment to 2.8 million people and indirect employment to 8.9 million people.  The aggregate revenue of the industry is US$100 billion in 2012, where export and domestic revenue stood at US$69.1 billion andUS$31.7 billion respectively.  The industry’s share of total Indian exports is about 25 per cent in FY2012  North America is the key market for exports of computer software and services; 58.8 per cent of India’s exports were to North America in 2011-12 http://www.nasscom.in/indian-itbpo-industry
  9. 9. CNX IT INDEX  The CNX IT Index represents about 13.69 % of the free float market capitalization of the stocks listed on NSE and 97.13 % of the free float market capitalization of the stocks forming part of the IT sector as on December 31, 2013.  The total traded value for the last six months ending December 2013 of all index constituents is approximately 10.34% of the traded value of all stocks on the NSE and 92.84% of the traded value of the stocks forming part of the IT sector. http://www.nseindia.com/products/content/equities/indices/sectoral_indi ces.htm
  10. 10. CNX IT INDEX CMC Ltd. NIIT Technologies Ltd. CORE Education & Technologies Ltd. Oracle Financial Services Software Ltd. Financial Technologies (India) Ltd. Persistent Systems Ltd. HCL Technologies Ltd. Polaris Financial Technology Ltd. Hexaware Technologies Ltd. Rolta India Ltd. Info Edge (India) Ltd. Tata Consultancy Services Ltd. Infosys Ltd. Tech Mahindra Ltd. KPIT Technologies Ltd. Vakrangee Ltd. MindTree Ltd. Wipro Ltd. MphasiS Ltd. eClerx Services Ltd. http://www.nseindia.com/products/content/equities/indices/sectoral_indices.ht m
  11. 11. TREND OF CNX IT INDEX AND VALUE OF INR AGAINST USD 45 50 55 60 65 70 75 5000 6000 7000 8000 9000 10000 11000 CNX IT Index Indian Rupee http://www.nseindia.com/products/content/equities/indices/historical_index_da ta.htm CNX return 28.59% IT return 65.33% Rupee-USD -16.29%
  12. 12. 400 600 800 1000 1200 1400 1600 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 HCL 2100 2600 3100 3600 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 Infosys 1000 1500 2000 2500 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 TCS 97.90% 300 400 500 600 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 Wipro 38.93% 234.10% 34.78% http://www.moneycontrol.com/stocks/hist_stock_result.php?ex=N&sc_id=TCS&mycomp= Tata%20Consultancy%20Services
  13. 13. IMPACT OF RUPEE DEPRECIATION ON IT INDUSTRY  Depreciation of rupee’s value provide short-term benefits but in the long- run it will affect signing of new contracts by domestic IT firms.  when the companies bid for fresh project, they do not know at what rate they would hedge their contract - at Rs. 60, Rs. 65 or Rs. 70 to the US dollar.  With the problem of high volatility of the currency rate, It will be difficult to fix the price for their new projects and convince their customer  Additionally, the gains from the falling rupee are not likely to be very significant as most IT companies hedge their forex position. Nasscom President Som Mittal told The Hindu. August 28, 2013
  14. 14. PHARMACEUTICAL INDUSTRY  Pharmaceuticals sector is one of the key sectors where Indian companies have created a global brand for themselves besides software.  Pharma industry contributes 5% in 2012 and 6.2% in 2013 to GDP.  In 2012, India contributed exports worth USD 15 billion to the global generics market and almost 40% of exports were to the US alone.  The Pharma industry has performed well on exports having been increased from Rs 386 billion in 2008 to Rs 775 billion in 2012.  The pharmaceutical sector stands to benefit from a fall in the rupee, as between 60 and 80 per cent of its revenues come from exports. http://articles.economictimes.indiatimes.com/2013-02-03/news/36721424_1_indian- pharma-domestic-pharma-market-generic-market http://www.thehindubusinessline.com/features/investment-world/as-the-rupee-sinks- the-winners-are/article4840999.ece
  15. 15. COMPANIES (CNX PHARMA INDEX) The CNX Pharma Index represents about 5.34% of the free float market capitalization of the stocks listed on NSE and 80.89% of the free float market capitalization of the stocks as on December 31, 2013. 1. Cadila Healthcare Ltd. 2. Cipla Ltd. 3. Divi's Laboratories Ltd. 4. Dr. Reddy's Laboratories Ltd. 5. GlaxoSmithKline Pharmaceuticals Ltd. 6. Glen mark Pharmaceuticals Ltd. 7. Lupin Ltd. 8. Piramal Enterprises Ltd. 9. Ranbaxy Laboratories Ltd. 10. Sun Pharmaceutical Industries Ltd.
  16. 16. 45 50 55 60 65 70 4500 5000 5500 6000 6500 7000 7500 8000 CNX PHARMACEUTICAL INDEX CNX Pharma Dollar rate http://www.nseindia.com/products/content/equities/indices/historical_index_da ta.htm
  17. 17. http://www.moneycontrol.com/stocks/hist_stock_result.php?ex=N&sc_id=GI&mycomp=G laxoSmithKline%20Pharmaceuticals 250 350 450 550 650 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 RANBAXY 1500 1700 1900 2100 2300 2500 2700 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 DR REDDEYS 28.06% 54.43% 114.65% 250 350 450 550 650 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 SUN PHARMA 300 350 400 450 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 CIPLA 17.23%
  18. 18. IMPACT OF RUPEE DEPRECIATION ON PHARMA INDUSTRY  The Indian pharmaceutical industry imports more than 75 % of raw materials for manufacturing purposes.  Rupee depreciation will increase the cost of imported raw materials.  Small and mid-cap companies will be more affected by the increasing cost of raw materials than the major players who have a higher export component in their revenue.  Small and mid-cap companies, which primarily cater to the domestic market, are hit by increasing inflation and raw material costs.  Glenmark and Ranbaxy have a significant portion of their debt in foreign currency. So export gains will be partially offset by debt and interest payments.
  19. 19. CONTD…  Profitability of companies is also affected by loans they owe in foreign currency. Higher Dollar conversion rate invariably results in higher interest and loan repayments. The additional debt burden adversely affects their profitability. http://timesofindia.indiatimes.com/business/india-business/Pharma- companies-fortunes-tied-to-GDP/articleshow/19671339.cms
  20. 20. ENERGY SECTOR  India has become one of the largest energy intensive countries in the World.  In 2011-12, India was the fourth largest consumer of Crude Oil and Natural Gas, in the world after the United States, China, and Russia.  Energy has been universally recognized as one of the most important inputs for economic growth  There is a strong two-way relationship between economic development and energy consumption
  21. 21. CONTD..  Due to India’s economic rise, the demand for energy has grown at an average of 3.6% per annum over the past 30 years.  Petroleum demand in the transport sector is expected to grow rapidly in the coming years with rapid expansion of vehicle ownership.  The country relies on imports for a considerable amount of its energy use  31% of the country's total imports are oil imports http://mospi.nic.in/mospi_new/upload/Energy_Statistics_2013.pdf?stat us=1&menu_id=216 http://www.indiaenergyportal.org/overview_detail.php
  22. 22. IMPORTS http://mospi.nic.in/mospi_new/upload/Energy_Statistics_2013.pdf?status=1&men u_id=216
  23. 23. http://www.eia.gov/countries/analysisbriefs/India/images/crude_oil_imports.png
  24. 24. COMPANIES (NSE CNX ENERGY INDEX) 1. Bharat Petroleum Corporation Ltd. 2. Cairn India Ltd. 3. GAIL (India) Ltd. 4. Indian Oil Corporation Ltd. 5. NTPC Ltd. 6. Oil & Natural Gas Corporation Ltd. 7. Power Grid Corporation of India Ltd. 8. Reliance Industries Ltd. 9. Reliance Power Ltd. 10. Tata Power Co. Ltd.  http://www.nseindia.com/products/content/equities/indices/sectoral_indi ces.htm
  25. 25. TREND OF CNX ENERGY INDEX AND VALUE OF INR AGAINST USD 45 48 51 54 57 60 63 66 69 6500 7000 7500 8000 8500 9000 energy Dollar rate http://www.nseindia.com/products/content/equities/indices/historical_index_da ta.htm CNX Return 28.59% Energy Return 10.58% INR - USD -16.29%
  26. 26. 240 260 280 300 320 340 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 ONGC 200 250 300 350 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 IOC 15.05 250 300 350 400 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 BPCL 250 300 350 Jan/12 Apr/12 Jul/12 Oct/12 Jan/13 Apr/13 Jul/13 Oct/13 Jan/14 GAIL 26.780.18 4.02 http://www.moneycontrol.com/stocks/hist_stock_result.php?ex=N&sc_id=ONG&mycomp =Oil%20and%20Natural%20Gas%20Corporation
  27. 27. IMPACT OF RUPEE DEPRECIATION ON ENERGY SECTOR • A sharp decline in the value of the rupee will affect the power generation capability of power plants that are heavily dependent upon imported coal for electricity generation. This would mean an increase in the level of energy deficit in the country. • A fall witnessed in power generation capacity is likely to have an adverse affect on all the three sectors of the economy namely agriculture, industry and services. • “ Rupee depreciation will have the highest impact on Indian Oil Corporation (IOC) and Bharat Petroleum (BPCL) because 50 per cent of their total debt are in foreign currencies in 2012-13” - Global rating agency Fitch
  28. 28.  NTPC Ltd and Power Grid Corp. of India Ltd had around 30% of their FY13 (year-end March) debt in foreign currency and have not hedged their foreign currency exposures.  Reliance Industries Ltd had a significant proportion (92%) of its FY13 debt in foreign currency. However, RIL has a hedge, with both its raw materials as well as final products priced in dollar.  At FY13 , RIL had also hedged its currency and interest rate exposures through interest rate swaps (Rs.324 billion), currency swaps (Rs. 33 billion), options (Rs.23 billion) and forward contracts (Rs. 894 billion). The hedging covers the company’s debt, imports and its exports.  http://businesstoday.intoday.in/story/rupee-slide-to-impact-ioc-bpcl- most-fitch/1/198204.html  http://www.assocham.org/arb/general/Rupee_Exchange_Depreciation_Im pact_Analysis-2012.pdf  http://petroleum.nic.in/pngstat.pdf
  29. 29. CONCLUSION  The major reasons for rupee depreciation are slow economic growth rate, weakening capital inflows and widening current account deficit  Rupee depreciation will benefit the Export oriented IT sector only in the short –run. And moreover many Pharma companies hold loan in foreign currencies that will increase their cost of debt  Indian Energy sector that is hugely dependent on Imports are hit very badly by weakening of rupee against USD  To stabilize the currency exchange rate The RBI has reduced the limit for outbound investment and remittances from India , Restricts the import of gold and oil by increasing the import duty, have increased the limit of FDI Investments in 12sectors and enhanced FII limits in government and corporate bonds  http://www.thehindu.com/business/markets/govt-rbi-taking-steps-to-stabilise- rupee-chidambaram/article4995540.ece
  30. 30. THANK YOU

×