5 Companies that Stand to Benefit from a Rising Dollar

Donald Trump's anticipated return to the White House has turned attention to the US dollar. If the rally in the dollar continues, it could significantly impact industries across emerging markets.

The US dollar experienced its biggest one-day gain against global currencies in eight years on 7 November 2024, following Trump's re-election and a republican senate majority.

With Trump's return sparking fears of intensified trade policies, such as a potential 10% global import tariff and a 60% duty on Chinese imports, the dollar index surged over 1.5%, reaching a multi-month high and causing ripples across global currencies.

In response, the Reserve Bank of India (RBI) has been actively intervening by selling dollars through state banks to stabilise the rupee, while the Chinese yuan continues to weaken.

The strengthening dollar is placing notable pressure on global markets, especially Asian currencies.

While the Indian rupee has been more resilient than some of its regional peers, a stronger dollar could trigger short-term capital outflows as investors shift to dollar-denominated assets.

However, a weaker rupee might offer an export advantage, potentially driving revenue growth for certain sectors.

Here's a look at five stocks that stand to gain from a rising dollar.

#1 Dr Reddy's Laboratories

First on the list is Dr Reddy's Laboratories.

Dr Reddy's Laboratories is an Indian multinational pharmaceutical company based in Hyderabad.

With a vast portfolio that spans oncology, gastroenterology, and cardiovascular treatments, Dr Reddy's operates in over 25 countries, including the US, Europe, and other key emerging markets.

Known for its robust research and development (R&D) focus, the company continually innovates new products and formulations. It holds a prominent position in the global generics market, offering affordable, high-quality medicines worldwide.

Its business model is segmented into global generics and proprietary products, pharmaceutical services and active ingredients (API), branded generics, biosimilars, and over-the-counter drugs, covering a broad range of therapeutic needs.

With operations across 65 countries, the company stands out for its innovation in drug development and discovery.

A weaker rupee could favour Indian pharmaceutical companies, especially those specialising in cost-effective generic drugs, as it enhances their export potential.

Additionally, the new US government's approach to drug pricing may create a supportive environment for Indian pharma exports.

Altogether, Dr Reddy's is positioned to benefit from a stronger dollar, making it a top contender among dollar-sensitive stocks.

Dr Reddy's Lab's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	175,170.0	190,475.0	215,452.0	246,697.0	280,111.0
Revenue Growth (%)	13.4	8.7	13.1	14.5	13.5
Net Profit	20,260.0	19,516.0	21,825.0	45,073.0	55,779.0
Net Profit Margin (%)	11.6	10.2	10.1	18.3	19.9

Source: Equitymaster

On the financial front, Dr Reddy's Laboratories has achieved a compound annual growth rate (CAGR) of 12.6% in revenue and an impressive 23.4% growth in net profit over the past five years.

Dr Reddy's is developing new small molecules for immuno-oncology and differentiated products to improve existing therapeutic agents. The company is also investing in digital therapeutics and cell and gene therapies.

The company also aims to be carbon neutral in its direct operations by 2030, and to reduce indirect carbon emissions by 12.5% across its supply chain by the same year. The company also plans to use 100% renewable power by 2030.

For more details, see the Dr Reddy's Lab company fact sheet and quarterly results.

#2 Sun Pharma

Next on the list is Sun Pharma.

Sun Pharma, India's largest pharmaceutical company, is engaged in the manufacturing, development, and marketing of an extensive range of branded and generic formulations as well as active pharmaceutical ingredients (APIs).

Its diverse portfolio includes generics, branded generics, and speciality products, allowing it to cater to a wide range of therapeutic needs.

With approximately 43 manufacturing facilities spread across India, the Americas, Asia, Africa, Australia, and Europe, Sun Pharma has established a robust global presence.

Additionally, the company operates six advanced research and development (R&D) centres in India, Israel, Canada, and the USA, focusing on generics, biological support, and new drug development.

The company's distribution network spans over 150 countries across six continents. It also holds a prominent position in India, with its top 30 brands featured in India's top 300 pharma brands.

The US market contributes over 60% of Sun Pharma's annual revenue, making it a significant player in one of the world's largest healthcare markets.

As a beneficiary of a rising dollar, Sun Pharma stands to gain from increased revenue in rupee terms due to its substantial export exposure and dollar-denominated income from the US market.

Additionally, a stronger dollar may provide a competitive edge for Sun Pharma's cost-efficient manufacturing, making it an attractive supplier of affordable generics in international markets.

Further, the new US government's stance on drug pricing could also provide a favourable environment for Indian pharma exports, as the sector is well-equipped to meet global demands.

Sun Pharma's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	328,375.0	334,981.0	386,545.0	438,857.0	484,967.0
Revenue Growth (%)	13.0	2.0	15.4	13.5	10.5
Net Profit	41,868.0	22,847.0	34,058.0	85,608.0	96,484.0
Net Profit Margin (%)	12.8	6.8	8.8	19.5	19.9

Source: Equitymaster

On the financial front, Sun Pharma has achieved a compound annual growth rate (CAGR) of 10.8% in revenue and an impressive 24.6% growth in net profit over the past five years.

Going forward, the company plans to focus on four key areas.

For its US business, it's planning to enhance its share of branded products and ensure broad product offerings to customers across multiple categories.

For India's business, the focus is on productivity enhancement and innovation.

It also plans to enhance its speciality product basket for its emerging market business, maintain leadership, and enhance its presence in a high-growth market in its global consumer business.

For more details, see the Sun Pharma company fact sheet and quarterly results.

#3 Arvind

Next on the list is Arvind.

An Indian textile company that manufactures denim, cotton shirting, knits, and other fabrics. It is the flagship company of the Lalbhai Group and is headquartered in Ahmedabad, Gujarat.

Arvind is one of the world's largest denim manufacturers and the second largest producer and exporter of denim. It also retails its own brands and licensed international brands like Tommy Hilfiger, US Polo Association, and Arrow.

Through its export division, Arvind Exports, the company is also a leading exporter of handmade carpets, with its production based in Bhadohi, India.

Known for its craftsmanship and ethical practices, Arvind Exports focuses on high-quality Indo-Nepali, printed, handloom, and tufted carpets.

The majority of these products are shipped to Germany, particularly through Hamburg, making Arvind Exports a key player in the international carpet market.

As the dollar strengthens, Arvind's exports could see a boost in revenue since its products, primarily sold in global markets, become more valuable in terms of rupee earnings.

A favourable exchange rate provides an edge by improving profit margins on international sales, allowing Arvind to maximise gains from its established export base.

This currency dynamic could provide essential support for the company's financials, particularly as Arvind continues to expand its retail presence and refine its product lineup.

Arvind's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	73,690.0	50,772.0	80,099.0	83,825.0	77,378.0
Revenue Growth (%)	2.5	(-31.1)	57.8	4.7	(-7.7)
Net Profit	944.0	(-274.0)	2,679.0	4,167.0	3,526.0
Net Profit Margin (%)	1.3	(-0.5)	3.3	5.0	4.6

Source: Equitymaster

In terms of financial performance, Arvind has achieved a CAGR growth of 37.8% in net profit over the past five years, underscoring its resilience and adaptability.

With plans to further enhance its retail footprint and product offerings, Arvind is well-positioned to capitalise on the export advantage a strong dollar provides, solidifying its role in both domestic and international markets.

For more details, see the Arvind company fact sheet.

#4 Dixon Technologies

Next on the list is Dixon Technologies.

Dixon Technologies (India) Limited, a leading Indian electronics manufacturing services (EMS) company, is strategically positioned to benefit from a rising dollar due to its growing export operations and role in global supply chains.

Dixon manufactures a wide range of electronic products, from consumer electronics and lighting to home appliances, mobile phones, and security devices.

With a clientele that spans international markets, Dixon's export revenue is set to gain a boost as the dollar strengthens, increasing earnings in rupee terms and making its cost-competitive offerings even more attractive on a global scale.

In March 2023, Dixon's Founder and Chairman, Sunil Vachani, projected that the company's exports could skyrocket from US$ 10 billion (bn) to US$ 100 bn over the next five years.

This ambitious target is backed by India's potential for import substitution in electronics, as only US$ 30 bn of the US$ 120 bn domestic demand in this sector is currently met by Indian manufacturers.

A stronger dollar not only improves Dixon's margins on exports but also positions the company to tap into growing opportunities as global supply chains diversify.

If the US were to adopt a protectionist stance with increased tariffs on Chinese goods, companies might further shift manufacturing operations out of China to avoid higher costs. India, with Dixon as a key EMS player, stands to benefit from this shift.

As foreign exchange dynamics make Indian manufacturing more appealing, Dixon is well-poised to capture demand from multinational firms looking for alternative manufacturing bases.

This macroeconomic and geopolitical tailwind could accelerate Dixon's growth trajectory, as it is well-prepared to scale operations and capitalise on its reputation for reliable, high-quality electronics manufacturing.

Dixon Tech's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	44,001.0	64,482.0	106,971.0	121,920.0	176,909.0
Revenue Growth (%)	47.4	46.5	65.9	14.0	45.1
Net Profit	1,205.0	1,598.0	1,903.0	2,551.0	3,749.0
Net Profit Margin (%)	2.7	2.5	1.8	2.1	2.1

Source: Equitymaster

The revenue and net profit have grown at a 5-year CAGR of 42.8% and 42.7%, respectively. This robust growth has led to a strong RoCE and RoE averaging 21.2% and 30.3% over the last 5 years.

Additionally, Dixon Technologies has significantly benefited from the Indian government's Production Linked Incentive (PLI) scheme, which supports the electronics sector and aims to increase domestic manufacturing in the country.

The company has partnerships with global players such as the Japanese company Rexxam for manufacturing Printed Circuit Boards (PCBs) and is building a new facility in Noida to produce 1.3 million laptops for Taiwanese PC maker Acer.

Its focus on semiconductors, coupled with its capabilities in assembly and product development, places Dixon in a prime position to capitalise on the growing global demand for electronics.

For more details, see the Dixon Technologies company fact sheet and quarterly results.

#5 Tejas Networks

Last on the list is Tejas Networks.

Tejas Networks, an Indian telecommunications equipment manufacturer, stands as a significant beneficiary of a rising dollar due to its robust export operations and international client base.

The company designs, develops, and sells advanced telecom products used by telecommunications service providers, internet service providers, utilities, and government entities across 75 countries, including developing regions like Southeast Asia and Africa.

With its top-tier positioning in global optical aggregation and broadband access markets, Tejas has built a strong export-focused business model.

As the dollar strengthens, Tejas Networks benefits directly through improved revenue and profit margins from its exports. Payments received in dollars translate into higher earnings in rupee terms.

This currency dynamic provides a substantial advantage for Tejas, particularly as a part of the Tata Group, given the group's strategic emphasis on innovation and global expansion.

Moreover, as a top 10 global player in optical networking with over 440 patents, Tejas continues to invest heavily in research and development, allowing it to remain competitive on the global stage and offer cutting-edge telecom solutions.

The rising dollar also aligns well with Tejas Networks' plans to grow its international footprint, especially as telecommunications infrastructure investment is increasing in developing regions.

Tejas Network's Financial Snapshot (FY20-24)

(Rs m, Consolidated)	FY20	FY21	FY22	FY23	FY24
Revenue	3,905.0	5,266.0	5,506.0	9,215.0	24,709.0
Revenue Growth (%)	(-56.6)	34.8	4.6	67.4	168.1
Net Profit	(-2,371.0)	375.0	(-627.0)	(-364.0)	630.0
Net Profit Margin (%)	(-60.7)	7.1	(-11.4)	(-4.0)	2.5

Source: Equitymaster

Coming to financials, the sales has grown at a 5-year CAGR of 22.4%.

The shift toward localization of supply chains and India's push to become a global tech hub further position Tejas to capture the growing demand for cost-effective, high-quality telecom products.

Tejas Networks plans to expand its global presence and focus on providing cost-effective 5G solutions to developing markets. It expects 20% revenue growth over the next two years.

With the biggest order in its history received from BSNL, the performance of Tejas Networks is expected to turn around.

For more details, see the Tejas Networks company fact sheet and quarterly results.

Conclusion

Investing in stocks that stand to benefit from a rising dollar can be a smart strategy, especially during periods of dollar strength, as certain sectors and companies become more competitive internationally or see revenue boosts due to favourable currency conversions.

Additionally, a strong dollar can create challenges for global competitors, making Indian exporters more attractive to international buyers seeking alternatives to pricier imports from other countries.

However, it's important to assess each stock carefully.

For instance, companies with high import costs might see profit margins squeezed despite their export gains, while others with significant debt in foreign currency may face increased interest payments, diminishing the currency advantage.

Additionally, a rising dollar can affect investor sentiment, potentially leading to higher volatility and short-term capital outflows from emerging markets, which could impact domestic stock prices.

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