Street buys into export story as rupee hits fresh all-time low

The falling rupee has seen investors rushing to increase exposure to export-oriented sectors such as health care and information technology. Though the bears have not spared these stocks in the current correction, analysts believe this is the right time to buy into these, given their dollar exposure.

The BSE benchmark index, the Sensex, fell nearly 1,500 points, or eight per cent, in the four trading sessions ending Wednesday. Stocks such as Dr Reddy's Laboratories fell seven per cent, Sun Pharmaceutical Industries 11 per cent, Cipla seven per cent, Tata Consultancy Services six per cent, Infosys four per cent and Wipro four per cent in the same period.

On Thursday, as the rupee touched a new low of Rs 65.56 against the dollar, these sectors were up about 2.5 per cent. Healthcare stocks have outperformed since the rupee began falling, dropping 1.5 per cent, compared with a four per cent decline in the Sensex. And this, after a correction from an eight per cent rise in the interim period. The BSE IT index has done one better, having risen by about 21 per cent.

Market participants say defensives such as health care and technology are favourites among investors, owing to the dollar exposure of the companies. Earnings numbers of these companies are expected to be better in the forthcoming second quarter due to the continued depreciation of the rupee.

"A lot of investors have been shifting their investments from other sectors to stocks in these sectors once the rupee decline began. Also, the US economy reviving could mean more business for these companies," said Sunil Jain, vice president-equity research at Nirmal Bang Securities.

"The US recovery is a good news for these companies. There are still some opportunities available as some of the companies in the large and mid-cap space are still reasonably valued," said Amish Munshi, senior fund manager and head of research-equities, Tata Asset Management.

Valuation issues could play spoil-sport, suggest some.

"In an uncertain environment like this, people like hiding in a defensive sector. However, some of these stocks are still not fairly valued," said Rikesh Parikh, vice-president-equities at Motilal Oswal Financial Services.