Rising rupee hits Infosys, TCS, HCL Tech, Wipro, Tech Mahindra; Sensex closes with losses

S V Krishnamachari
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Update: The BSE Sensex closed 45 points lower at 29,398 while the NSE Nifty ended 2 points down at 9,085. Top index losers were TCS, Wipro, Infosys and Hindustan Unilever.

The rally on stock and currency markets on Tuesday after BJP's landslide win in Uttar Pradesh has brought bad news to investors of Indian IT companies. The rupee closed at its one-year high of 65.82 on Tuesday, causing a fall in share prices of Infosys, Wipro, TCS, Tech Mahindra and HCL Tech on Wednesday. The domestic currency opened at 65.76 to the greenback on Wednesday.

A strong rupee adversely impacts the profit margins of Indian IT companies since they derive a significant portion of their revenues in dollar. 

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Infosys was down 2.32 percent to Rs 1,011, Tech Mahindra was trading 0.4 percent lower at Rs 478, Wipro had fallen 0.79 percent to Rs 497 and TCS was down 2.08 percent to Rs 2,509 on the BSE at around 12.05 pm.

The BSE Sensex was down 35 points to 29,407, while the NSE Nifty was almost flat 9,084. Investors are cautious ahead of the US Federal Reserve's policy meeting later today. There is a broad consensus that an interest hike is most likely.

On Tuesday, foreign institutional investors (FIIs) were net buyers of Indian equities worth Rs 4,087 crore, while their Indian counterparts were net sellers at Rs 1,520 crore, according to provisional data released by the National Stock Exchange.

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Retail inflation on the rise

Data released by the Indian government showed that retail (CPI) inflation rose to 3.65 percent in February from 3.17 percent in January and reversing a seven-month trend.  

"Perishables, primarily vegetables (fell by a smaller scale), cereals, fruits etc. rose on month-on-month basis as the seasonal support factors fade and the impact of demonetisation proved transient," Radhika Rao, economist, group research at DBS Bank, said in a note on Wednesday.

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A slew of factors is bound to push inflation up in the coming months, according to Rao. "Into FY18, we expect CPI inflation to challenge the 4 percent medium-term target as demand conditions improve post the banknote ban, rural wages recover, higher commodity prices and base effects kick in. We expect FY18 inflation to average 5.0 percent YoY from 4.6 percent this year," she said.

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