Dollar Index jumps to 5-week high: Analysts decode its impact on IT, Pharma and Apparel sector – What should investors know

For some sectors, it's good news, and for some it's bad, the dollar index has jumped to a five-week high on Friday to 109 level, which is the highest since July 15 in the anticipation of US Fed Reserve another rate hike and on recessionary concerns.  

Export services sector such as Information and Technology as well as Pharma along with Apparel have positive impact amid a surge in the Dollar Index. On the contrary, the same is negative for sectors such as Oil & Gas, which also increases the import bill of the country. 

For the IT sector, strong demand from clients for digital and cloud transformation will continue to drive growth while margins which are under pressure due to high attrition and employee cost will be key monitorable in the coming quarters, Nirvi Ashar, Fundamental Analyst, Religare Broking said. 

The IT and Pharma sectors are export-oriented, so a rising dollar is always positive news for them, the analyst at Religare Broking stated. 

As far as other sectors such as pharma and apparel are concerned, they will continue to experience movement as per the normal economic cycles for their sectors, Nirali Bhansali, Fund Manager- Equity, Samco AMC said in her comment. 

Bhansali further stated that IT is one of them, as it derives over 30 per cent of its revenues from the US and the sector continues to have a good runway for growth given that it has now lost the tag of being a discretionary expense and has now become more of a necessary expense. 

Commenting on the dollar index trajectory, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd said, there is a resistance at the 109-110 level, as the all-time Dollar Index was at 109.5. However, if it breaches this level, the dollar index may surge to 130 level, he added. 

He picked Infosys and Cipla as the best pick from the IT and Pharma sector that gets benefit from the rising dollar index. 

The recent tightening of monetary policy by the US Fed reserve due to inflation concerns as well as anticipation of an aggressive rate hike in September policy is driving the dollar, Ashar said in a note.