The year saw IT majors and BPOs battling and adjusting to the rising rupee, which threatened to spoil their party. The sharp rise in the Indian currency against the US dollar affected their margins and they had to look at new ways of improving their bottomlines. The options ranged from hedging the risk to renegotiating contracts, cutting down hiring, to billing the clients in currencies other than the dollar.

The impact of rupee rise was so much that software firms, including IT bellwether Infosys, lost sheen at the stock market too, with investors finding IT stocks less attractive. The worst hit were the BPOs and the small companies. But despite the rupee showing no signs of weakening, 2008 looks somewhat promising.

Between the clamour of the rising rupee, the year saw domestic IT companies snapping up companies from all over the world. Their appetite for global deals will only grow in the new year. If the passing year belonged to Azim Premji-led Wipro because it sealed one of the biggest-ever acquisition by an Indian company overseas, Infosys is on the look-out for acquisitions in the coming year.

Barring acquiring Philips Electronics for $28 million, Infosys remained conservative in buyouts. Its peer Wipro, on the other hand, clinched New Jersey-based Infocrossing for $600 million – the biggest overseas acquisition by any Indian IT company. But Infosys is eyeing 15 deals of about $100 million each and some of it may be sealed in 2008. ?They are at various stages and will take place outside India in the next one year,? Infosys CEO Kris Gopalakrishnan said.

TCS added another feather in its cap in the year by developing Asia?s fastest and world?s fourth fastest supercomputer. IT companies also started expanding their footprint in the countries of Europe, Africa, North America and Asia, and the trend is likely to continue in the future as well.

Experts said, in 2008 too, a stronger rupee would continue to eat into the tech sector?s topline as more than two-thirds of IT/ITeS revenues come from the US. But unlike in 2007, when the companies were not prepared for an acute 12% appreciation in the rupee, this time they are properly hedged and geared up to face the situation.

Companies are confident that measures like hedging and cost management will help them expand margins in the coming year. TCS, the largest Indian software exporter by sales, had about $2.6 billion outstanding in hedges at the end of second quarter of the current fiscal. ?We are proactively hedging our currency exposures to mitigate the currency impact. Our hedging position as of September 30 was $1.4 billion,? Infosys CFO V Balakrishanan said.

Alok Aggarwal, chairman, Evalueserve, however, cautions, ?Most Indian companies in this sector would have their net profits before taxes reduced by 6% by the end of March 2008. Since the Chinese yuan and the Eastern European currencies have not appreciated substantially, these countries are likely to become more formidable competitors.?

3i Infotech, a mid-cap company, says its has 35% of its revenues coming in from the domestic market, and only around 25% from the US. In the US too, a good part of the revenues earned is pumped into its operations there, so the impact of the rupee appreciation is minimal. Says Anirudh P, the company?s COO-South Asia Region, ?The Indian market offers tremendous opportunities in the BFSI segment. Also, our portfolio is divided 50:50 between products and services, which has acted as a cushion against the vagaries of the rupee versus the dollar.?