New Delhi: The rupee's downward spiral against the US dollar could spell good news for the domestic IT-ITeS sector, which has been facing strong headwinds due to a weak global economy, provided the Indian currency's softening continues.

However, depreciation in the Indian currency, which fell to a life-time low of 58.16 against the dollar, could lead to rise in input costs for handset makers who see their margins eroded by the fall and could be forced to pass on the burden to the consumer, in case the situation persists.

"Rupee depreciation will impact IT and off-shore service providers in a positive way if it sustains for a longer period say for this quarter. It will help in expanding their margins to a certain extent," Gartner Research Director Arup Roy said.

On being asked if the clients will pressurize the service providers (IT & ITeS) for discounts, he said: "The scenario of clients looking to re-negotiate on discounts will only happen if the depreciation in the Rupee continues for a longer time."

Angel Broking Research Analyst Ankita Somani said Rupee depreciating by 1 per cent gives about 30-35 basis points in the operating margins of the IT firms.

"Rupee depreciation in a way is good for the IT firms. Normally the operating margins of these firms are helped by the depreciation," she added.

However, for the middle and low tier mobile makers, the weakening of the Rupee against the US dollar will pinch their margins as most of them import devices or their parts and this could lead to a rise in their input costs.

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