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The greenback rose 9 percent against currencies
including the euro in January-to-March from a quarter earlier,
driven by the diverging outlook for U.S. monetary policy and
economies such as Europe - the second-biggest market of Indian
IT services exporters. The euro's decline coincided with the
rupee's strength - bad news for Indian exporters to the euro
zone. The euro fell 12.4 percent against the rupee in its
biggest quarterly drop ever.
The rupee found support in a market view that the U.S. will
tighten monetary policy at a slower pace than thought, lowering
the chances of capital outflows from emerging markets including
India. The resulting cross-currency headwinds crimped
quarter-on-quarter revenue growth of India's $146 billion IT
industry by 2.25 to 3.00 percentage points in the final three
months of the fiscal year ended on March 31, according to a
report by brokerage and investment group CLSA this week. Tata
Consultancy Services said last month that currency fluctuations
would reduce its margins by 40 basis points quarter-on-quarter.
The non-U.S. businesses of Indian IT companies have grown
significantly in recent years as they sought to diversify their
revenue streams after the 2008 crisis saw a plunge in U.S.
business. The firms have enlarged their footprint in Europe
through acquisitions and local offices. Revenues from Europe
have nearly doubled in the last five years for India's top six
IT companies by market value, including Infosys, Wipro and HCL
Technologies, outpacing revenue growth from the United States in
that period.
The six companies may report revenue growth of 13.2 percent in
the fiscal year ended on March 31, according to estimates
compiled by Thomson Reuters, the slowest in five years. "In the
March quarter, revenue growth will be down by 2 to 2.5 percent
quarter-on-quarter, but the currency impact should be less in
the coming quarters due to reduced volatilities in the cross
currencies," said Sarabjit Kour Nangra, vice president of
research at Mumbai-based Angel Broking.
(Additional reporting by Shilpa Murthy in BENGALURU; Editing by
Ryan Woo)
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