A Guest Post by Raghav Soni - Regular Contributor 

There is an old saying that when everyone becomes pessimist that’s the time to be an optimist.

What really went awry:-

Earlier this year INR touched the level of Rs.39 to a dollar which made many software companies afraid of it because majority of their sales come from billings in the U.S (which results in them being paid in USD) The pessimist behaviour even got backing from multinational banks who predicted that rupee could appreciate to as much as rs.36 to a dollar in a year initiating many exporters, most of them software companies to create extra short positions on dollar in the derivatives market so as to hedge themselves against further rupee appreciation and in between even make profits from extra short. There trade backfired on them as oil companies started buying more dollars due to rising crude prices added with outflows in capital markets depreciating the rupee to 42.8(current level) from 39.9(31^st march08 level).

Through this sudden unexpected depreciation of the rupee many firms made huge losses in the forex segment.

Some software companies who lost heavily in derivative gamble includes kpit Cummins,hexaware technology and many more.

Outlook on software companies:-

Rupee depreciation is always good for Indian software sector only if they haven’t sold their dollar exposure but as reported many companies have already booked their dollar earning around 40 to a rupee till June, So they have missed the opportunity to get that extra margin which is around 8-10%. Very significant because India’s total IT exports was around 40 billion dollars in 2007-08.

The software sector would benefit immensely in the coming months if  the dollar remains at these levels  and may even recover their derivatives losses which could offset the danger of sub prime crisis in U.S.

This is the reason why many companies are focusing more on Indian markets as they are unable to cope up with dollar-rupee fluctuations.

This scenario has taught the Indian tech service exporter to look more towards high margin segment and provide value proposition rather than work as a cheap supplier as currency fluctuation erodes most of their profits.

Hardware sector:-

Earlier Prices of almost all the IT peripherals took a nose dive after appreciation of rupee but that is changing now as India exports most of the IT peripherals from foreign markets.

This would spell trouble for the Indian hardware sector and may also affect Indian broadband scenario as lower PC penetration due to higher prices could result in lower internet users.

The prices of IT peripherals (incl.mobile phones) could rise upto 10 % in coming weeks as hardware exporters have depleted their earlier reserves….and are now forced to purchase same hardware at higher prices thus increasing prices in the market.

Harshil Adds: The Indian IT Sector poses many cues for the Indian Social Media Marketing Sector – Social Media Marketing Agencies should also guard themselves against the fact that they can be looked at as ‘vendors’.

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