Nifty IT Index Gains as Rupee Hits Record Low of 92.28 Against US Dollar

Rupee Depreciation Boosts IT Stocks on March 4​

The Nifty IT index emerged as the only sectoral gauge trading in positive territory on Wednesday, as the Indian rupee weakened sharply to a fresh record low of 92.28 against the US dollar on March 4.

The sharp depreciation in the domestic currency supported information technology stocks, which derive a significant portion of their revenue from North America and bill clients in US dollars. A weaker rupee increases rupee realizations for these companies, directly supporting operating margins.

Currency Impact on IT Sector Margins​

The average rupee rate during the December quarter stood at 89.2. Analysts commonly highlight that every 1 percent decline in the rupee typically results in a 15 to 25 basis point expansion in operating margins for large IT services firms.

During the third quarter, the rupee depreciated by an average of 1.7 percent, providing a currency driven boost to profitability.

Among major companies, Tata Consultancy Services reported a 20 basis point margin benefit from currency movements in Q3. Infosys recorded a 40 basis point tailwind during the same period.

Infosys Leads Gains, Mid Cap IT Stocks Advance​

Infosys emerged as the top performer on the Nifty index in early trade. Shares of Mphasis and Persistent Systems were also trading nearly 1 percent higher.

Several IT companies have rebounded from their 52 week lows. Persistent Systems has climbed 12 percent from its low, Tech Mahindra has gained 11 percent, Mphasis has risen 10 percent, and L&T Technology Services has advanced 7 percent.

Despite recent volatility, the Nifty IT index remains up 20 percent so far this year and is trading just 1.5 percent above its 52 week low.

Oil Price Shocks and Rupee Weakness: A Historical Pattern​

Historically, sharp increases in crude oil prices have often coincided with rupee weakness. For India, oil shocks have frequently translated into currency pressure.

During the Gulf War, the rupee was devalued to 24.58 per dollar. In the 2008 global financial crisis, it weakened to 51.75, while during the Ukraine conflict it crossed 80 per dollar.

From 17 in 1991 to 92 now, episodes of oil driven stress have often compressed years of currency adjustment into shorter timeframes, reflecting the impact of global shocks on the Indian currency and markets.