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Indian ADRs surge

Jan 20, 2001

The NASDAQ gained more than 5% last week on the back of strong buying interest in technology stocks. Better than expected quarterly performance by IBM, Juniper Networks, Microsoft, Nortel and eBay led the rally in tech stocks. The gain was despite the earnings warnings issued by major companies, which included Intel and Apple Computers. However, negative news on the economy caused weakness in the markets. Economic data indicated that business inventories rose more than expected in November as sales softened for the second consecutive month. Also, the US consumer confidence index tumbled in January reaffirming a slow down in the economy.

Comparative performance
(Price in $) 13-Jan-01 20-Jan-01 Change
Infosys 112.9 124.8 10.5%
Satyam Infoway 6.9 7.1 2.7%
Rediff 3.4 5.5 63.0%
Silverline 9.4 9.7 3.3%
VSNL 13.8 14.4 4.5%
ICICI Bank 6.8 9.0 32.1%
ICICI 11.7 11.8 1.1%
Wipro 55.0 63.1 14.8%

Indian ADRs surged on the back of strong quarterly earnings of technology companies. The star of the week was Rediff. The stock gained more than 60% over a week after it reported a 31% surge in revenues and expects to turn profitable within a year. It does not foresee a slowdown in advertising revenues, which currently contributes around 90% to total income (balance from e-commerce). Remarkably, the company’s marketing expenses dropped by 22% while page views soared to 670 m (up by 69%) quarter on quarter. Rediff is still trading at a discount of more than 50% compared to its issue price. Another Internet stock Sify witnessed selling pressure at higher levels after gaining 39% in the last week. It however, gained 3% towards the end of week with large volumes.

ICICI Bank and Wipro also gained smartly. The buying interest in Wipro was fueled by spectacular quarterly performance of the company. The company has recorded a YoY growth of 120% in profits and 36% in revenues. The risk from dot com revenues is minimum as the segment contributed a marginal 1.5% to total revenues for the quarter ended December 2000. Wipro’s ADR is trading in line with its domestic price. Among the others Infosys continued its rally for the second consecutive week.

VSNL also attracted some buying support on the increasing talks of disinvestments. The company is considering the strategy of entering into the cellular business as a means of generating additional revenues. This will be required as post March 2002, its monopoly over international telephony ends. The stock lost its sheen in the last two days of the week on selling pressure.

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