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What to look for in IT and pharma stocks as exporters eye top dollar

The dollar index is holding on to three digits after a gap of two years. Does that mean one should go about buying every IT and pharma stock to make the most of higher income on every dollar earned going forward?

By Sandeep Singh  May 2, 2022, 5:15:37 PM IST (Updated)







This means each dollar earned by exporters such as TCS, Infosys, Wipro, Sun Pharma and Cipla will be worth a lot more in rupee terms than it was before.



The surge in the greenback can continue in the days to come as the Fed is open to aggressive rate hikes to tame inflation.

But not every company belonging to the IT and pharma baskets will receive the same amount of benefit.

According to AK Prabhakar, Head of Research at IDBI Capital Markets, investors need to look at companies with a stronger export revenue. His top picks are Infosys, TCS, Sun Pharma, Gland Pharma and Zensar Tech.

For instance, TCS has a policy of hedging the risk of currency volatility, Prabhakar told CNBCTV18.com. "They know about 90 percent of revenue in advance."

So how should one assess these companies now?

Equitymaster Senior Research Analyst Richa Agarwal suggests investors to be selective in picking stocks from both baskets.

For IT companies, she suggests investors look at:

  • The company’s range of product and service offerings, especially as digitization and new technologies are being adopted fast

  • Client retention and addition

  • Ability to maintain margins in the past


"The IT sector is witnessing a lot of competition from startups, which are not focused on profits but operating in an aggressive expansion mode, and hence attracting most of the talent away from conventional IT companies," she told CNBCTV18.com.

How IT shares have performed in the recent past








































































StockReturn (%)
One monthThree monthsOne year
TCS-4.3-3.913.9
Infosys-16.9-715.6
Wipro-15.6-7.93.9
HCL Tech-7.6-0.118.7
Tech Mahindra-17.3-10.828.9
L&T Infotech-19.7-18.125.7
L&T Tech-17.7-10.755.7
Mindtree-16.4-4.669.3
Mphasis-15.8-6.560.6
Coforge-4.7-10.947.7

To identify the best of pharma companies, she has a different checklist:

  • Prefer companies with strong management and market leadership in niche products

  • Look at pricing power

  • Look at companies with diversified markets

  • Look at companies with a good track record of complying with regulations of the markets they operate in


"Most importantly, one should be mindful of the pharma company valuations and should not compromise on the margin of safety," Agarwal added.

How pharma shares have performed in the recent past


























































































StockReturn (%)
One monthThree monthsOne year
Sun Pharma112.244.1
Laurus-1.816.727.3
Gland Pharma-2.5-3.620.8
Alkem-11.2-4.917.7
Divi's-1.214.315.2
Abbott16.213.9
Torrent Pharma0.25.912.6
Cipla-5.65.38.2
Cadila-1.1-11.1-37.3
Aurobindo-9.20.8-35
Lupin-2.2-17.2-29.5
Dr Reddy's-4.4-2.1-19
Biocon7.31.2-6.5

"Pharma companies hedge a limited portion of currency fluctuations... Sun Pharma has very good exports and Gland is a major supplier to the US," added Prabhakar of IDBI Capital.

Stocks from both IT and pharma packs have begun 2022 on a lacklustre note, having outperformed the overall market for much of 2021.



Major IT companies are struggling against high attrition rates as well as employee costs and margin pressure.



Drugmakers are grappling with increased competition, price erosion and a stricter regulatory environment.

Other exporters

Prabhakar is of the view that the Sri Lanka crisis and COVID-related lockdowns in China are favourable for Indian exporters in general. He is also positive on textile companies.

However, he has a word of caution: The rupee might appreciate in the next six months to bring back the currency risk for smaller companies that "don't get into the business of hedging".