Friday saw the Sensex falling more than 2% mainly due to decline of IT stocks. The fall is surprising, considering the rupee is depreciating against the dollar.

When the rupee weakened and closed at 45.72 to the dollar, BSE IT became the biggest index loser on Friday as it saw a fall of 4.60 per cent.

Mr Gaurav Dua, Head of Research, Sharekhan Ltd, reported, “It is the rupee’s recent appreciation against the euro and the pound which will have a negative impact on the Indian GAAP numbers of IT companies. To make matters worse, the US dollar has been appreciating against the euro and the pound, and when revenues billed in these currencies are consolidated under US GAAP, they will show a dip.”

Presently around 30% of IT companies revenues are being generated from Europe and this twin impact will definitely prove to be substantial for them.

According to the analysts, “Despite the rupee-dollar depreciation, IT firms are unable to realize the direct benefit. Every IT company hedges its expected revenues through a mix of forwards and options contracts. Generally, the options component constitutes a very small portion of overall hedges and hence companies are not able to reap fully the benefits of a depreciating rupee.”

CLSA, an international broking firm informed, “Infosys might miss its Q2 dollar revenue growth guidance owing to cross currency fluctuations; and that its Q2 revenue guidance should be cut by 17-19 per cent”, adding that “the dollar rise would hit Infosys’ invoicing in other countries.”

On Friday, some other big IT losers which saw a fall were TCS (3.34 per cent), Satyam Computer (3.47 per cent), and HCL Technologies (3.68 per cent).

14,000.81 was the figure where Sensex closed at. Nifty however saw a lesser fall than others at down 1.44 percent, to 4228.45.

On Thursday, Reliance Industries had experienced a fall of over four percent and on Friday it fell 3.34%, thus becoming the biggest Sensex loser, declining 6.32 per cent on the BSE.