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Effect of Money Appreciation

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Krupa (Querist)

22 June 2007 The fall in IT scrips have been primarily on account of massive rupee appreciation. The rupee has appreciated from Rs 44.29 to a dollar in beginning of January to Rs 40.75 now. That means an 8 per cent appreciation, which has in turn led to a correction in stocks. Considering that a one per cent appreciation in rupee reduces margins by 30-40 basis points, an 8 per cent rise, can have a margin impact of 2-4 per cent," Mr Ashwin Mehta, senior research analyst at Ambit Capital said.
CAN U EXPLAIN THE RELATION

amit

amit (Expert)

27 June 2007 increase in RS. wld result in fetching of lesser value on exports by the same %(8% in your case).... we need to discount the same as the IT companies may involved in hedging of the Ccy fluctuations, and also salries paidto the off shore employees... the combined effect would be 2-4% only.

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