Indian Rupee (INR) is at an 8 month low

Heavy dollar demand from oil companies and other corporates have pushed rupee down to an eight-month low on Tuesday. The domestic currency opened lower at 40.65 and touched an intra-day low of 40.98/99. It ended the day at 40.96, about 35 paise lower than the earlier close of 40.61/62.

International oil price also touched a record high of $121 a barrel on threats to supply in Nigeria and Iraq and growing global fuel consumption. Most oil companies stock up on oil supplies before the monsoon, to avoid the difficulties they could face in transportation. Therefore, the rupee typically weakens in the first quarter of the fiscal.

Further there seems to be corporate demand for dollars possibly for remittances abroad. The remittances may be for completing acquisitions overseas. Companies such as Tata and Bharti Telecom would be requiring dollars for their overseas acquisitions. These factors have led to sharp depreciation in rupee in the recent past. We expect IT companies in particular to outperform the broader market on account of these developments.