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As Rupee breaches 76/$, companies with high USD debt would be hit Â

March 24
15:02 2020

In these times of uncertainty, investors prefer to be invested in a safer asset class where preference moves towards the world’s reserve currency which is US dollars, Dollar Index is at a 10-Year High, Hemang Kapasi, Portfolio Manager – Equity Investment Products, Sanctum Wealth Management Private Ltd, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpt:

Q) There is plenty of fear on D-Street. Sensex and Nifty are now trading below their crucial support levels. What is the way forward for the markets amid the spread of COVID-19?

A) Global markets are correcting due to the spread of the pandemic virus and sell-off in the Indian market is on similar lines with other emerging markets.

As markets don’t like uncertainty, investors are looking to sit on side-line and be in cash till the clarity emerges. Markets are reacting to fear hence it is difficult to predict an exact bottom.

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A lot of businesses are available at multiyear low valuations, people with longer-term horizons should invest in a staggered manner to take advantage of these prices rather than try to predict the bottom

Q) A Lot of stocks have declared a dividend in March. Is it because of FY ending?

A) Companies generally declare dividends during the second half of the financial year. Public sector undertakings announce dividends towards the end of fiscal to aid in shoring up government revenues.

Additionally, some companies might be giving dividend early to take some tax benefits

Q) Looking at the recent fall some reports have surfaced that promoters have started buying the shares. Can this environment can turn out to be a good buyback opportunity?

A) Considering the fall is so sharp in prices if promoters feel that the value of their business is currently below the long-term intrinsic value and the balance sheet of the company supports doing buyback than it’s a very good opportunity to maximise shareholder value by doing a buyback.

Q) Rupee breached Rs 76/USD last week. What led to the fall and what is the way ahead for the currency and the stocks which are likely to benefit the most from the sudden depreciation?

A) During times of uncertainty investors prefer to be in a safer asset class where preference moves towards the world’s reserve currency which is US dollars, Dollar Index is at 10 year high.

Having said that Indian Rupee has performed inline or better than other emerging markets currencies. Rupee depreciation benefits export-oriented companies and sectors like Information technology, Chemicals, and Pharma which have a sizeable export business.

But, demand for exports in the short term is again going to be weak. While companies having dollar-denominated debt would be impacted due to Rupee depreciation

Q) More than 50% of the Nifty50 stocks have touched their 52-week/multi-year lows. Is there any historic reference that suggests that the worst is over, and should investors base their decision to buy stocks based on stocks that are hitting their record lows?

A) History may not repeat but it does rhyme. Every fall is not the same but similar. It is a good time to pick up businesses having longevity as prices are attractive.

But, investors cannot expect to reap benefits immediately as markets don’t like uncertainty.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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