Monday Morning Rupee / Gold update, Individual Stock news

The rupee on Monday appreciated further against the US currency to close at 40.3700/3750 on the back of sustained rally in equity markets amid weak dollar overseas.

In two-way trade at the Interbank Foreign Exchange (Forex) market, the domestic unit opened slightly better at 40.40/42 a dollar from last Friday's close of 40.4200/4250 per dollar.

Later, it gyrated in a range of 40.30 and 40.42 per dollar on alternate bouts of buying and selling.

Finally, it ended at 40.3700/3750, a net rise of nearly five paise over the previous close.

A sustained rally in equity markets mainly helped the rupee's surge on expectation of robust capital inflows.

Foreign Institutional Investors (FIIs) reportedly pumped in over 1.2 billion dollars in the last week.

The rupee also got strength from dollar sales by banks as well as exporters, forex dealers said.

The rupee got support from weak dollar overseas as the dollar declined to a record low versus the euro for the fourth consecutive session Friday as weaker-than-expected US retail sales data made matters worse for the the battered greenback.

Domestic currency reacted downwards to some extent after the central bank intervened to cap the rupee's surge to prevent exporters competitiveness.

According to analysts, strong intervention by the apex bank and heavy selling by foreign funds in equity markets could stem the rupee's upsurge, said chief dealer of a private bank.

FIIs have bought nearly 2.1 billion dollars equities in the first nine days of July, taking their total purchases this year to 7.8 billion dollars, against 7.9 billion dollars pumped in last year.

Dealers are looking at the stock market for further clues about the rupee's direction as the benchmark continued it's record breaking spree and was on Monday up by another 38 points.

The Reserve Bank of India (RBI) fixed the reference rate for the US currency at Rs 40.37 per dollar and for the single European unit at Rs 55.67 per euro.

The rupee premiums on forward dollar dipped further on sustained receiving by exporters.

The Benchmark six-month forward dollar premiums payable in December ended at 30 - 32 paise, down from 34 - 36 paise on Friday and the far-forwards maturing in June also closed lower at 71 - 73 paise from 74 - 76 paise previously.

In cross-currency trades, the rupee reacted downwards against the British Sterling and the Japanese Yen while it improved further against the Euro.

The Indian unit declined against sterling to close the day at Rs 82.29/31 per pound from Friday's close of Rs 82.14/16 per pound and also softened against the Japanese Yen to Rs 33.17/19 per 100 yen from previous close of Rs 33.03/05 per 100 yen.

However, the rupee edged up against the single European currency to Rs 55.66/68 per euro from last close of Rs 55.68/70 per euro.

India's largest software exporter Tata Consultancy Services said Monday that its first quarter net profit rose by 36 percent despite sharp gains in the rupee this year that hit earnings.

The firm, also known by its acronym, TCS, said net profit for the three months to June rose to 12.03 billion rupees (481 million dollars) from 8.83 billion rupees a year earlier.

Income in the first quarter rose nearly 27 percent to 53.65 billion rupees.

TCS shares fell 8.95 rupees or 0.79 percent to 1,127.9 ahead of its earnings statement, while the Indian stock market rose 0.25 percent or 38.5 points to a record 15,311.22.

Dealers had expected sharp gains in the rupee this year to a near decade high against the dollar to hurt local currency earnings, since many of the firm's clients pay in dollars.

"We have maintained profitability despite an appreciating rupee and wage hike factors," said S. Ramadorai, the chief executive and managing director of TCS.

TCS added 54 new clients in the first quarter while 8,706 employees joined in the same period to bring the workforce to 95,000.

"TCS has showed a better-than-expected performance, despite being hit by the strong rupee. We are more positive on TCS going ahead, with a right mix of business streams," said Ashwin Mehta, an analyst with brokerage Ambit Capital.

TCS said it had also struck a 100-million-dollar deal with an Asian telecom company to provide a full range of outsourced services. It did not provide more details about the agreement.

TCS is part of India's diversified Tata group and employs people from 60 different nationalities.

The Mumbai-based firm earns nearly half of its revenues from banking and financial services in an industry that relies on India's cheap but skilled English-speaking workforce.

TCS listed on Indian exchanges in August 2004 after raising 1.2 billion dollars.

neoIT, a leading services globalization(SM) consulting firm, today issued a research report which examines the impact of currency fluctuations on clients who are leveraging global sourcing. These fluctuations are currently impacting the profitability of service providers and client should expect vendors to react by passing along costs wherever possible.

The latest research report from neoIT, Currency Risk: Overcoming the Dollar's Demise, helps clients plan for changes in outsourcing relationships that will inevitably occur as offshore vendors adapt.

"While the current downward movement of the U.S. dollar is not likely to result in major changes for global services clients, clients need to be prepared for longstanding vendors to undergo behavior changes," said neoIT CEO Atul Vashistha. "In India, for example, the U.S. dollar has slipped 8.5% compared to the Rupee since the start of 2007. Putting contingency plans in place now to deal with currency risk will help to avoid unpleasant surprises later in the year."

The newest research brief looks at the implications of currency fluctuations on vendors and the potential impact on client organizations. neoIT's research recommends client organizations consider developing contingency plans, such as building currency fluctuations and hedging risk into global services contracts. At the same time, clients need to closely monitor current sourcing agreements so that they are aware of incremental changes in vendor's practices and billing procedures which subtly mask price increases.