With an appreciating rupee impacting its margins, IT bellwetherInfosys Technologies on Friday sought the intervention of the Reserve Bank of India (RBI) to regulate speculative inflows to check the high currency volatility.

“The RBI should intervene right now to halt heavy speculative inflows through the FII (foreign institutional investments) route to reduce the currency volatility, which is currently ranging from 10-15 percent,” Infosys chief financial officer V. Balakrishnan told reporters here after announcing the quarterly financial results.

Noting that excessive speculative inflows would kill the export sector, especially the resurgent IT industry, Balakrishnan said about $22 billion came through the FII route during the last six months.

“With a trade deficit of $13 billion, such a wide currency fluctuation is unsustainable for the country as well as the software services sector, which depends largely on export revenues. We hope the central bank (RBI) will step in to ensure the quality of inflows,” Balakrishnan said.

Infosys declares 200 p.c. interim dividend

Referring to the wide appreciation and depreciation of the rupee vis-à-vis US dollar during the last 18 months from Rs.46-39-52 and then to 44.50 currently, he said such cross movements in the currency market was impacting the company’s operating margins on quarterly and annual basis.

“The rupee appreciated again during the second quarter (July-Sep) of this fiscal (2010-11) from Rs.46.45 to Rs.44.50, impacting our operating margin (30.2 percent) by 1.3 per cent and short-term hedging by 0.8 per cent,” recalled Balakrishnan.

Admitting that a volatile currency was one of three major challenges facing the IT industry, including the IT bellwether, chief executive S. Gopalakrishnan said the company was learning to manage and live with such fluctuations by trying to minimise its impact on the operating margins as it became a global phenomenon.

“Hovering around 10-15 per cent, currency volatility is not only very high, but also very challenging as the rupee appreciated 4.5 per cent during the last 12 months,” Gopalakrishnan asserted.

Hoping that the rupee would depreciate to Rs.45 against the US dollar soon, Balakrishnan said the RBI should stop at some point of time speculative inflows to stabilise the currency swings.

Analysts are of the opinion that appreciating rupee could also squeeze margins for larger rival Tata Consultancy Services and No. 3 Wipro, which report results next week.

The top three software firms have raised salaries and are hiring more staff as they compete for talent and orders from the likes of IBM and Accenture.

Infy shares fall

Shares in Infosys, valued at $41 billion, fell as much as 3.7 per cent, after initially hitting a record high in a weak Mumbai market More than 530,000 shares were traded on the Bombay Stock Exchange, nearly four times the 30-day average volume. The shares ended 3.4 per cent lower.

“There is some stress on rupee. But, it is likely the RBI may step in and intervene to curb a steep appreciation in rupee,” said Shishir Bajpai, senior vice-president of IIFL Private Wealth, referring to the Reserve Bank of India.

“Expectations of topline and bottomline growth still remain. Other things are in place. We continue to hold the stock for our clients,” he said of Infosys shares.

Analysts are unlikely to upgrade their earnings estimates for the company, known for its conservative guidance. Infosys expects dollar revenue to rise 24 to 25 percent in its fiscal year ending in March 2011 versus market forecasts of 21 to 24 per cent.

Infosys has raised guidance for the fourth consecutive quarter. In July, it forecast growth of 19 to 21 per cent.

“But from an economic environment, from a currency environment, the environment is challenging. And for our business, there is a third (challenge), which is the regulatory environment,” said Kris Gopalakrishnan.

For the year to date, the rupee has gained 5.6 percent on record $22.5 billion foreign fund inflows into shares, making the currency one of the best performers in Asia.

Indian software companies hedge some of their currency exposures but a chunk of their costs are in rupees, and therefore currency appreciation tends to squeeze margins.

Indian software firms are also concerned about what they fear are “protectionist measures” by the United States, which include a new immigration bill that would raise the cost of U.S. work visas and a state ban by Ohio on offshoring government work.