Rupee Valuation May Help Outsourcing Situation

Much has been made of outsourcing lately. In fact, it has been become a hot campaign issue. Outsourcing should be viewed however as a trade issue. As trade becomes imbalanced the relative value of currencies change. This appears to be the case with respect to Indian outsourcing. Note the following from Briefing.com's In Play from today:

11:06 ET Strong Indian currency poses potential risk to Outsourcing names -- Brean Murray : Breen Murray states that the Indian rupee (INR) has advanced an alarming 3.6% against the U.S. dollar since 3/18 and 4.4% Q/Q. Firm believes that possible explanations include capital inflows driven by upcoming IPOs/privatizations and double-digit GDP growthin the DecQ. This currency swing has injected an element of uncertainty into future financial results at Offshoring companies. In the absence of an INR retracement and/or other offsetting factors (higher revenue baseline), firm's fiscal 2005 EPADR est could be at risk for a 5-10% reduction. Firm states that stocks with such currency exposure include INFY (gross margin reduction of 100 basis points = $0.10 EPADR impact within the framework of firms model), WIT ($0.05) and SAY ($0.04). Firm believes CTSH appears best positioned to withstand this test, based on: 1) geographical split of its cost structure; and 2) historical practice of overinvesting in the business.

In the end, markets have a way of working these things out.

Comments

[amrit]

hi blogger
I have seen your blog and it is informative and attractive. I also have a blog and
would like to link to your blog which would help in sharing information and resources.
My Blog url is: " http://www.a1technology.com/blog/outsourcing.htm " .
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regards and thanks
Amrit

[bhavna]

I read your blog on outsourcing. This blog is quite informative for my business, even I have blog on outsourcing so can we exchange the links to share our knowledge resources.

[Shelly]

The information provided by this blog is very informative. Yes it very much true the as the rupee power it directly impact the business of outsourcing

Thanks
Shelly