As large exporters, Indian pharmaceuticals firms stand to benefit from the weak currency. Operating margins for Indian technology exporters tend to rise 30 to 35 basis when the rupee falls 1% against the dollar, according to the Economic Times.
The benefit of the weak currency to those sectors depends on currency hedging losses, but the two groups combine for over 17% of EPI’s weight. However, Indian energy, industrial, telecom and utilities companies all have downside exposure to the rupee. For example, Indian telecoms hold large amounts of debt denominated in foreign currencies and utilities that have import fuel sources are unable to pass those higher costs along to customers, according to the Economic Times. Those sectors combine for 36.6% of EPI’s weight.
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ETF Trends editorial team contributed to this post.