Rupee could start appreciating from current levels; two stocks to benefit from a stronger rupee

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Updated: Jul 13, 2020 3:43 PM

With emerging market currencies appreciating in the last few months, India’s Rupee has maintained the status quo and moved between the narrow range of Rs 75.3 and Rs 76.5.

Some of these companies include Adani Enterprise, JSW Steel, Motherson Sumi, Nestle, Maruti Suzuki, Shree Cement, Bata, among others.

With emerging market currencies appreciating in the last few months, India’s Rupee has maintained the status quo and moved between the narrow range of Rs 75.3 and Rs 76.5. Despite the outflow of foreign investors, Rupee had outperformed emerging market currencies in the first few months of the year but has only gained 1% since April. However, this might soon change and Rupee might now take the path of scaling up, according to a report by ICICI Direct. The appreciation expectations are nudged by lower crude oil prices and current account in positive. Rupee could also help some listed companies with net dollar payments.

Some of these companies include Adani Enterprise, JSW Steel, Motherson Sumi, Nestle, Maruti Suzuki, Shree Cement, Bata, among others. Rupee appreciation will also help keep volatility at bay and create opportunities. “The rupee outperformance vis a vis Emerging market currencies is expected to continue on the back of lower crude prices, which have a positive impact on India’s macros,” the report said. Here are two stocks to trade in a three-month time frame that may benefit from a stronger rupee.

Voltas
Buy in range of Rs 560-575
Target Rs 675

Voltas is a strong brand and it stands to benefit even from the opening up of the economy, that could help push sales. The stock may drive higher with the help of short closure. “We like Voltas for its strong brand recall and healthy balance sheet, which would cushion the company from any adverse situations,” the report said. Analysts say that the stock has been underperforming so far but things might soon change. Data from ICICI Direct shows that 5% appreciation in currency has had an absolute impact of Rs 51 on net profits of the frim, translating to a 10.2% impact on net profit.

Havells
Buy in range of Rs 580-595
Target Rs 690

Havells is another brand name that has a strong potential to grow with the opening of the economy. The wire and cable manufacturer, according to the report, has seen good performance in products for the consumer category while the industry category faced challenges. “The consumer discretionary space was under continuous selling pressure in the last few months. It seems the rupee appreciation trend may bring some life in the stocks, which may be beneficiaries of this,” the report said. Rupee appreciation had a 10.4% impact on Havells net profit, contributing Rs 81.8 crore.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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