Indian tech ADRs hit new lows

The NASDAQ lost its sheen amidst gloomy economic data, a host of earnings warnings and investors losing confidence. The index, which closed up by 2% on the first trading day of the week failed to maintain the rally on continued flow of negative news. Not only the tech stocks but the old economy stocks too issued depressing future earnings outlook. The warnings by P&G, Nike, Texas Instruments, Gateway Inc, 3Com, Applied Micro circuits, JDS Uniphase Inc and Oracle Corp. adversely affected sentiment of the market.

The latest economic data dampened sentiment further. The data revealed that the US consumer confidence index had tanked to a two year low in February ’01. Mr. Greenspan’s testimony also disappointed the markets. The Fed chairman indicated that an interest rate cut might not come prior to its policy meeting on March 20.

Indian tech ADRs plummeted to new 52-week lows. Infosys, Silverline and Wipro lost ground. The sector was hit by speculation that large US companies are cutting software orders and lowering rates for software services from Indian companies. Infosys was hit by the rumours that Nortel Networks was cutting software orders. However, the company clarified that it is not renegotiating rates or getting lower orders from overseas clients.

ICICI and ICICI Bank were the major gainers. This was due to an interest rate cut on small savings, debt market reforms, removal of surcharge and reduction in dividend tax announced in the budget. During the week, ICICI Bank reduced its PLR by 50 basis points and announced a 100 basis points cut in deposit rates. This was following the RBI's 50 basis point bank rate cut. More than proportionate cut in deposit rates is likely to improve interest spread of the bank. The bank will also earn profits on its treasury portfolio.

VSNL was also up marginally over the week on disinvestment hopes. The company has announced a 40% cut in tariffs for its Internet leased lines in cities other than Mumbai and Cochin. It has also announced a reduction in tariffs on web hosting services. This is likely to increase the number of subscribers for the company, which is facing tough competition from the private players.

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