The move to reduce the flow of dollars into the country will selectively impact various sectors, reports CNBC-TV18.

To rein in the rising rupee, the government yesterday announced restrictions on external commercial borrowings (ECBs) yesterday. (See: Government tightens external commercial borrowing rules to check inflows)

The new norms state that a company can raise up to $20 million dollars through the ECB route after getting RBI''s approval. But ECBs over $20 million can only be spent overseas. This move comes after India has seen unprecedented dollar inflows through ECBs. In the period from April-July, India has received ECBs to the tune of $ 9 billion.

The government currently is also worried that it may not meet its $160 billion export target - that''s because the rising rupee has hit exports.

To counter this, commerce minister Kamal Nath had said yesterday that the government is thinking of another package of incentives for exporters. This is in addition to the Rs 1,400 crore package announced in July. But this new package will cater to the needs of sectors that were not included in the July package.

But, who will be significantly affected by the government''s current incentives to curb the impact of the rising rupee? The move to reduce the flow of dollars into the country will selectively impact various sectors, reports CNBC-TV18

Gainers and losers from the new ECB norms

Gainers:

• BPO / ITeS companies likely to benefit
  
• Export-oriented companies expected to benefit
  
• Major beneficiaries are technology and banking companies

Losers:

• Negative for oil marketing cos
  
• Mfg sector with capex to be impacted
  
• Hardcore manufacturing sector
  
• Capital Goods manufacturers

The BPO/ITES companies are likely to benefit. Export oriented companies are also expected to benefit. Since most of the IT companies have hedged at Rs. 40.50 per dollar, they may not feel any immediate impact of the government''s move.

On the other hand, Oil marketing companies will feel the brunt of the ECB norms, and will be hit negatively. The manufacturing sector with capex on their hands will also be similarly impacted. This is because the rupee depreciation may lead to companies booking losses.

Bala Swaminathan, head, corporate banking, Standard Chartered Bank, said, "There is ample liquidity currently available in this system but every single flow is important. My own sense of what RBI has done, is robbing Peter to pay Paul.

"The over-obsession with foreign exchange rates and therefore, to protect one sector of the economy which is technology companies and the BPO, will now mean that a whole other sector of the economy, which is the hardcore manufacturing sector, might end up paying higher interest cost," he added.

He points out another ECB stipulation that he feels, is a serious issue.

"They have also stipulated is money must be used to import equipment from overseas. So capital expenditure necessarily must happen overseas. That has got to have an effect on capital goods manufacturers in the country as well. So there are larger ramifications of this ECB secular beyond just interest companies," says Swaminathan.

A lot of Sensex companies will be positively impacted by the new ECB norms. The positively impacted Sensex companies account for 67 per cent of the weightage. There are technology, pharmaceuticals and banking companies; some of them that are impacted like Reliance etc. So we have seen a huge rally around the Nifty and Sensex on the back of the the ECB norms.

Reliance has a weightage of about 13%, backed by Infosys, at about 9.3%, ICICI Bank at around 9.5 per cent - all have been positively impacted.

Some other companies that have been negatively affected have been manufacturing and telecom companies; the weightage is around 10 per cent-15 per cent in the Sensex, in addition to oil marketing companies. But in terms of percentage, their impact on the Sensex is not much.