Japanese yen’s fall to a 34-year low will likely have a positive impact on the Indian automotive sector and companies which import electronic items, machinery and auto components from Japan, according to analysts even as they see a neutral to slightly positive impact on the overall markets.

The biggest gainer is expected to be the country’s largest passenger car maker Maruti Suzuki India Limited (MSIL), they told ETMarkets.

Maruti Suzuki, Motherson Sumi and Sharp are a few stocks that have Japanese parentage and are expected to be in focus.

“The fall in Japanese yen will benefit the importers as they will be required to pay less rupees for their imports in yen with rupee being in small range. Earlier in February 2022, 100 Yen was costing Rs 65, which has now come down to Rs 55,” Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP said.

“If royalty payments are being made by companies in yen, the outgoing will be lower. Indian imports could also increase, particularly electronics, machinery and auto components. Main imports from Japan are machinery, metals, electric machinery and iron and steel,” Bhansali said. However, exporters of IT, pharma, textiles, automobile, and ancillary will stand to lose, he opined.

The currency analyst said that exports designated in dollars would not be impacted much. Companies that have borrowed in yen will also benefit as their interest and principal outgoing will be lower if they have not hedged the same.Expert CA Krishnan R, Director & CEO of Unimoni Financial Services said, “The weakening of the Yen, especially to a 34-year low, can have a significant impact on various sectors in India, particularly the automotive industry. The automotive industry is growing in India, and many Indian companies are collaborating with Japanese companies for technology exchange and components”. He added that a weaker yen will make Japanese products relatively cheaper in international markets, and this will be beneficial for the Indian automotive industry, especially Maruti Suzuki.

Echoing similar sentiments, analysts Kranti Bathini and Nilesh Jain also see Maruti as a major beneficiary of a weaker yen. The company has to pay royalties to Suzuki Motor Corporation.

Bathini, Director-Equity Strategy at WealthMills Securities, said that he does not see any material impact on other sectors and yen’s fall will likely have a neutral to slightly positive impact on the auto sector.

On the question of Motherson Sumi, which has Sumitomo Wiring as a promoter company, he said that Motherson Sumi has its operations spread across geographies and it is unlikely to see any significant gains.

Bilateral trade between Japan and India at the end of FY 2022-23 was $21.96 billion of which Japanese exports were $16.49 billion and Japanese imports were $5.46 billion.

The Japanese currency fell to a 34-year low of 151.975 per dollar last week forcing an intervention from the Bank of Japan which purchased Japanese government bonds worth Rs 87.5809 trillion yen ($578.55 billion) in the fiscal year through March, Reuters reported. This compares to the previous year’s record JGB purchases of 135.989 trillion yen ($898.33 billion).

Nikkei has been on a downward trajectory since last week and has lost 1.34% in five sessions. Today, it was trading at 39,803.09 around India time, down by 566.35 points or 1.40%.

Also Read: PNB Housing Finance’s shares jump 14% on CARE Ratings upgrades

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)