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Indian ADR hit new lows - Views on News from Equitymaster
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  • Apr 7, 2001

    Indian ADR hit new lows

    The carnage in the US markets continues with a number of companies issuing earnings warnings. On the economy front too, the outlook is not encouraging.

    The week started with the lower than expected earnings forecast from finance giant American Express. The company warned of a drop of 18% in quarterly profits due to high yield debt losses. The tech majors Alcatel, Ariba, Broadvision, Veritas Software and Sycamore joined the list of companies issuing profit warnings. Recession worries were further heightened after Pacific Gas & Electric Co, a utility company, filed for bankruptcy protection. On the other hand strong earnings reported by Alcoa boosted the sentiment and the NASDAQ rocketed about 9% in a single day. Dell too reaffirmed on meeting its earnings forecast for first quarter profits but did not give any comment on future growth.

    The data released by NAPM was disappointing. The index of non-manufacturing sector fell to 50.3 in March from 51.7 in February. The US jobless data for the week of March 3 also showed a rise of 4.9% from 365,000 in the previous week.

    Tech slips
    (Price in $) 31-Mar-01 7-Apr-01 Change
    VSNL 11.9 12.0 1.1%
    ICICI Bank 7.2 7.3 0.7%
    ICICI 11.8 11.1 -5.9%
    Silverline 3.6 3.4 -6.3%
    Infosys 65.5 60.2 -8.1%
    Satyam Infoway 3.0 2.8 -8.3%
    Rediff 2.9 2.6 -10.6%
    Wipro 32.1 28.5 -11.2%

    Most of the Indian ADRs hit new 52 week lows. Volumes also remained on the lower side. VSNL and ICICI Bank were the key gainers. ICICI Bank gained as the ADR is trading at a discount of around 5% compared to its domestic price.

    Tech stocks continued their downward journey. Wipro and Rediff were the key losers. Wipro has announced the launch of BlueWave, Bluetooth protocol stack software. The software can be easily deployed in a broad range of embedded applications. It is the first Indian company to launch software using Bluetooth technology. However, investors were worried about its maintaining future profits growth as out of the top 10 clients of Wipro, 6 had already issued profit warnings.

    Globally the tech sector is affected by weakening demand, resulting in disappointing future outlook by the tech majors. The investors are keenly waiting the Indian tech majorsí results to be announced in the next week. This could probably decide the future trend in the Indian ADRs.

    The sell off continues
    Indices 31-Mar-01 7-Apr-01 Change
    NASDAQ 1,840 1,720 -6.5%
    Dow 9,879 9,791 -0.9%
    Hang Seng 12,761 12,387 -2.9%
    Nikkei 13,000 13,384 3.0%
    BSE 3,604 3,576 -0.8%



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