Keywords
Abstract
As it is known, each country is having its currency or else a group of countries is having a common currency (Ex: EURO) and these currencies itself used as a medium of exchange for any transactions happening within the specific political boundary or country. In this competitive globalized era, every company wants to enter into the international business and looking to tap the international market, in the process of doing so the volatility of foreign exchange rates have become a serious issue. Indian Information Technology (IT) sector contributes around 7.9% to India's Gross Domestic Product and Indian IT exports reached US$ 126 billion for 2017-18. Indian IT and ITeS (Information Technology enabled Services) sector contributes approximately 55% of market share to global services sourcing business and making itself as the largest destination for IT and ITeS sourcing across the world, majority of these companies’ services are mostly provided to offshore markets and payments for services rendered are received in foreign currencies. In this backdrop, it is important to know the level of foreign exchange exposure of these companies.
The present study finds the impact of exchange rate fluctuations on the profitability of select IT and ITeS companies in India. The study is based on fifty-six randomly selected companies for the period of 2016-18. The foreign exchange exposure of sample companies computed using Bodnar-Marston's (2002) formula.