A sharp depreciation in the rupee has failed to deliver the usual earnings boost for export-heavy sectors like IT and pharmaceuticals, as trade uncertainty, margin pressure, and foreign investor selling weigh on sentiment.

Rupee at Record Low, But Gains Muted

The rupee slid to an all-time low of 91.97 against the US dollar, down 7.1 percent since April 1, 2025. Historically, such moves have supported export-led sectors. This time, the response has been underwhelming.

Despite the currency tailwind, Nifty IT has gained about 5 percent and Nifty Pharma around 3 percent. In comparison, the broader Nifty 50 is up roughly 8 percent over the same period.

Why the Rupee Is Not Helping?

One key reason is that the benefit of rupee depreciation has been diluted by a weaker US dollar against other global currencies. For companies with diversified global exposure, this reduces the net currency advantage.

More importantly, tariff-related uncertainty around US trade agreements has emerged as a bigger overhang. Export-facing sectors remain cautious as potential changes in trade policy could directly impact revenues from the US, their largest market.

Sector-Specific Pressures

Pharma companies face reduced US trade volumes, softer earnings visibility, and valuations that remain elevated at around 30 times earnings. These factors have limited upside despite currency support.

IT firms continue to deal with margin pressure driven by AI-led productivity expectations and pricing constraints. While headcount rationalisation and currency benefits offer some relief, they have not been enough to drive strong stock performance.

Foreign Investors Stay Cautious

Foreign investors have been net sellers, pulling out ₹2,075 crore from IT stocks and ₹1,049 crore from healthcare stocks in early January alone. These outflows add to already heavy selling seen through 2025, further capping sector gains.

What Analysts Are Watching

Analysts note that IT demand is gradually improving, which could open the door to earnings upgrades. However, stock selection remains critical. Both IT and pharma could turn into contrarian opportunities if tariff negotiations progress positively, but until then, uncertainty is likely to remain a drag.