Rupee's fall could buoy these stocks

Mumbai: As the rupee extends its slide against the dollar, investors are veering towards sectors that can be insulated from the impact of a weaker currency. On Tuesday, the rupee fell past the 80-mark against the US dollar for the first time.


For information technology and pharma sectors, which are export oriented, a weaker rupee is a positive, but analysts warn that these sectors also face risks of a demand slowdown due to recession concerns in the US. The textile sector is also being seen as a direct beneficiary of a weaker rupee.

Analysts are looking at stocks which can benefit from rupee weakness and also stay relatively insulated from such macro risks. ET takes a look at top picks of leading brokerages from these sectors.

Cipla
CMP: ₹960.65
Year to date Change: -0.4%

Jayesh Bhanushali, AVP-Research at IIFL sees Cipla as a top beneficiary of a record low rupee. Cipla's US and India business growth in the fourth quarter of FY22 was strong, he said. Given the strong line-up of US launches, we believe that management's guidance of 21-22% operating margins for FY23 appears conservative, particularly if key US launches contribute $100 million to $200 million of incremental revenue in the second-half of FY23, said Bhanushali. Cipla has the best growth visibility among large-cap pharma peers, led by its diversified US pipeline, he added. He sees the stock testing ₹1,050 in a year.

Persistent Systems
CMP: ₹3,328.8
Year to date Change: -32%

Persistent Systems' management reiterated their confidence in delivering industry-leading growth in FY23 with continued investments in their cloud strategy, said Bhanushali of IIFL. Demand is robust, with no signs of moderation in any vertical or clients, and an equally strong deal pipeline, while margins will remain stable as the focus remains on investments, he said. Bhanushali said Persistent remains top mid-cap pick despite commanding a premium to peers, as it has the highest potential to surprise on earnings. IIFL has a target of ₹3,650.

L&T Infotech
CMP: ₹4,311.3
Year to date Change: -41.16%

Analysts said once the Mindtree merger goes through, the overhang of it will be removed and the stock could bounce back sharply. They said growth outlook is strong for L&T Infotech besides the company enjoying the sector tailwind of a weak rupee. "L&T Infotech's robust deal pipeline along with sustained net headcount additions and highest logo wins provide the base for strong growth in FY23. We believe L&T Infotech will continue to deliver industry-leading growth," said Edelweiss in a recent report, retaining a buy rating on the stock with a target price of ₹7,750.

Infosys
CMP: ₹1,484.9
Year to date Change: -21.4%

Shrikant Chouhan, head of research at Kotak Securities, said he is bullish on Infosys with a target price of ₹1,725. There are US recession risks but Infosys is prepared well for such headwinds and its BFSI and cloud businesses are also doing well, said Chouhan.

KPR Mill
CMP: ₹513.95
Year to date Change: -23.2%

Analysts said textile companies are direct beneficiaries of a weak rupee. Although it remains to be seen whether a weaker rupee will outweigh the expected demand destruction due to higher interest rates, analysts prefer KPR Mill shares to outperform. "KPR Mill is vertically integrated which is why we are bullish on the stock. Ready-made garments export business of KPR is also doing well," said Pankaj Pandey, head of research at ICICIdirect. He has a target price of ₹635 on the stock.