Stocks of several IT companies have surged to the highest level of quoting in 52 weeks. This is due to the weakening of Indian Rupee against other global major currencies. This has otherwise resulted in a huge increase in the P/R ratio (Price Earnings ratio) during three years period. The chart herewith displays the various company shares and their Price Earning ratios.
In line with Indian Rupee, share buy back offers from companies like TCS, and Mphasis has also attracted the investors. The rupee is now being traded at 72.19 against one US dollar. A weaker currency also helps the Exporters as it enhances their realisation. An one percent depreciation of the rupee improves the operating margins of IT companies by 35-40 basis points or 0.35 to 0.40 percentage points.
Though the present valuation of IT companies may look attractive, investors may look for a acquiring these stocks and also further depreciation in the rupee in the coming days.