Rupee fall triggers sharp rally in IT shares; BSE IT index outperforms

China’s decision to devalue its currency seemed to have paid rich dividends for shares of export-lead domestic information technology (IT) companies even as the broad market receded sharply after a sluggish opening trade. [caption id=“attachment_2387474” align=“alignleft” width=“380”]  Reuters[/caption] As China devalued its currency yuan by nearly 2 percent, the rupee also felt the heat, depreciating 31 paise to 64.18 against the dollar over previous day’s close of 63.87. In early trade, the rupee had fallen sharply by 35 paise to 64.22 against the dollar. Export-related sectors such as IT companies benefit immensely from a falling currency as most of these companies derive more than 80 percent of their revenues in dollar terms, thereby boosting their local earnings. At 12.10 pm, the BSE IT index outperformed the broader market, rising 1.3 percent to 11,263.66 as against nearly 0.5 percent fall in benchmark Sensex at 27,971.07. Among the gainers, Polaris rose 2.6 percent to Rs 213.30, Infosys 2.1 percent to Rs 1,105.25, MindTree Consulting 1.9 percent to Rs 1,378, Tech Mahindra 1.7 percent to Rs 540, TCS 1.1 percent to Rs 2,599.20 and HCL Tech 0.8 percent to Rs 942. Analysts reckon the falling rupee against the dollar would augur well for the top-rung local IT companies, as US-based outsourcers form large part of the overall clientele.