The report takes a look at how the surging rupee has impacted various sectors.

Software
The biggest export success story -- software -- will witness only a negligible impact on profitability owing to the surging rupee. The effect will only be to the extent of about 0.5 per cent, analysts say.

The software industry, which was caught on the wrong foot when the rupee began appreciating quickly learnt the business of hedging. This is very important since about 85 to 90 per cent of the billing in this sector is in dollars.

"A word of caution here: hedging can only help in the short term. In the long term if the rupee continues to strengthen against the dollar then hedging will not work as a solution," an industry analyst warns.

"Another factor that has been safeguarding the margins in software sector is the practice of doing business with contracts where the value of the dollar is pre-determined. This acts like a natural hedge where the company does not actually have to dabble in the forex market," a senior executive with a software company said.

This has however not become a industry practice yet and is largely restricted to the bigger companies in the industry.

Steel
The steel industry is a classic case of the rise in the rupee being offset by the rise in realisations. Global prices have been on an upswing with a sharp rise in the last six months.

Hot rolled coil prices are currently hovering around $400-$410 a tonne, representing a jump of more than 20 per cent over the ruling prices six months ago.

"The impact of the rising rupee on the bottomlines of the industry has been negligible because of the global firming up of prices," analysts say.

Oil
Any fluctuation in the rupee vis-a-vis dollar will have a minor impact on refining oil companies. According to an executive with an oil company, refining companies have rupee exposure in terms of buying raw materials such as crude.

For the refining companies it is a back-to-back pricing mechanism. In case the rupee strengthens than there will be a slight negative impact whereas if the rupee depreciates then it has a positive but marginal impact on the company's bottomline.

For the refining companies the crude refining margins on an average is around $3 a barrel. In value terms if there is 10 paise movement, high or low, compared with dollar, it will reflect only thirty paise per barrel.

But this is not the case with that of upstream oil companies, which are in the production of crude. They are considered under the exporter's category and for them even a minor fluctuation has a cascading effect.

"Consider a case when there is 10 paise appreciation of rupee. Crude is priced at $28 a barrel and our upstream companies produce crude in tonnes. One tonne is equivalent to approximately seven barrels of crude oil. So any appreciation will have to be multiplied by seven to get the impact on crude per tonne," the executive added.

Textiles
The rising rupee is expected to dent realisations of the Indian textile industry in current fiscal. Textiles forms a major part of the export basket and is one of the main contributors to the forex kitty.

A one per cent rise in the rupee would lead to a decline in profitability by 1.2 per cent, textile industry sources say.

This means that since the rupee has appreciated by about five per cent since January 2003 year and should logically impact profitability this fiscal by about five to six per cent say analysts. Companies are, however, not prepared to quantify the impact.

Says a senior executive of Arvind Mills, "In terms of export realisations, no doubt, the rising rupee has impacted the textile industry. This coupled with the rising cotton prices has been a cause for worry especially for large players with sizeable dollar exports."

Pradeep K Bhandari, deputy group president, Raymond Ltd points out: "The appreciation of the rupee does hurt exporters who have been used to the additional value from rupee depreciation. However, it is time that we learnt to live with two-way fluctuations in the home currency just as the rest of the exporting world has learnt to live. This should be looked upon only as one of the inconveniences of integration into global markets."

"Not only is RBI doing a good job of smoothening the trend but also a wide variety of hedging products are available to exporters today to manage currency risks. Indian exporters should quickly move up the learning curve in currency hedging skills to protect budgeted earnings,"

According to Apparel Export Promotion Council, garment exports, the largest contributor stood at Rs 23035.35 crore (Rs 230.35 billion) for 2002-03.

According to Cotton Textile Export Promotion Council, exports of cotton textiles stood at Rs 16,558 crore (Rs 165.58 billion) for 2002-03 and on an average it is expected to increase by 7 per cent this fiscal.

According to The Synthetic and Rayon Textile Export Promotion Council, the total exports comprising of fabrics, yarn, made-ups and fibre stood at Rs 7,629 crore (Rs 76.29 billion) for the period 2002-03 and is expected to increase by 15 per cent in the current fiscal.

On an average 6.45 per cent of the export earning is being affected due to such appreciation of Indian rupee. Now, with the value of the dollar declining over a period of time, exporters have been taking precautions and reduced the invoicing in dollar terms.

Auto
The auto ancillary sector has been touted as the biggest driver of export earnings in the coming years. About 15-20 per cent of the total auto component production is exported.

"Exports in this sector have just taken off and they are not big enough to feel the impact of the rupee rally yet. Most contracts are structured in a manner that they absorb most of the currency fluctuation," said industry analysts.

"The main point to be kept in mind is that only 30 per cent of the billing in the auto ancillary sector is dollar-denominated. If you take the case of some big companies, almost all their billing is Euro-denominated and the Rupee has remained weak when compared with the Euro. So the impact of the rising rupee has been cushioned to that extent," said an industry analyst.

The China example should assuage any fears of the negative of the rupee rally. The yuan has been steadily appreciating against the dollar but at the same time their export earnings are also on an upswing.

Gems and jewellery
The gems and jewellery industry remains unaffected by the rising rupee. The reason for this is that the surging rupee has been offset by the rise in exports.

According to figures issued by the Gems and Jewellery Export Promotion Council, the sector saw a 20.76 per cent jump in the total exports to $6,968 million for the period from April to November, 2003 from $5,770 million in the same period last year.

Total imports saw an increase from $4,854 million in April to November 2002, to $5,688 million in the same period in 2003.

Sanjay Kothari, chairman, GJEPC said, "The rising rupee hasn't drastically affected the gems and jewellery sector. The overall demand has in fact been very good.

"The industry is dependent on the pre-Christmas sales in the western countries and the indications have been promising. We are targeting a 10 per cent rise in exports over last year."

Hospitality
The rising rupee is unlikely to have an impact on hotels. The hotel industry is witnessing a boom with high occupancy levels. This has enabled the industry players to hike tariffs and offset the impact of the surging rupee.

The industry has also gained from the depreciation of the rupee against the euro. Since, there are a large number of travellers from Europe this has cushioned the impact to some extent of the rising rupee against the dollar.

Shipping
The impact of the rising rupee on shipping is expected to be negligible, say analysts. Technically a rising rupee should hit shipping companies as the freight earnings are in dollars or dollar denominated.

Consequently, they should lose out on the exchange rate and get less rupees for the dollar. On the other hand, most of their expenses like bunker, port charges interest costs are in dollars. Consequently, they will gains as they have to pay less rupees per dollar.

"In effect it depends on whether a shipping company is a net earner or net spender of foreign exchange. If a company is a net earner, it loses out. On the other hand, if it is a net spender it gains. In the current context, it hardly makes a difference as freight rates are at record levels. Consequently, a rise in the rupee by about 5 per cent has negligible impact," analysts say.

Power
There will be negligible impact of the rising rupee on the power industry.