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Indian ADRs: Holding out

Apr 28, 2001

After having rallied significantly earlier in April, the US markets seem to be taking a breather with profit booking having set in. The rally has drawn mixed reactions, with some labeling it a dead cat bounce. Others believe that the worst is probably over. So far in April, the Dow has gained 13.6% and the NASDAQ 16.3%.

Indices 20-Apr 27-Apr Change
Dow 10,579.9 10,810.1 2.2%
Nasdaq 2,163.4 2,075.7 -4.1%
Nikkei 13,765.7 13,934.3 1.2%
Hang Seng 13,448.1 13,386.0 -0.5%
Sensex 3,583.0 3,423.0 -4.5%

Indian ADRs posted a mixed performance, on the back of the sharp gains recorded last week. While Infy logged in gains, ICICI Bank was a significant loser. The fall in ICICI Bank can in part be attributed to the rumored losses the company has suffered in its capital markets operations (lending to brokers). Infy on the other hand appeared to be stabilizing at existing levels after its much publicized warning earlier this month.

(US$) 20-Apr 27-Apr Change
Infosys 63 66.3 5.2%
Satyam Infoway 4 4.1 2.5%
ICICI 12.2 11.9 -2.9%
ICICI Bank 7.4 6.6 -11.1%
Wipro 29 29.1 0.4%
VSNL 13.4 13.1 -2.0%
Dr. Reddy's 11.3 11.7 3.1%
Silverline 4.1 4.0 -2.2% 4.2 4.0 -6.0%

Rediff too has been among the prominent losers. This was because the company reported lower than expected growth in turnover. For the year ended March 2001 Rediff reported nearly 140% growth in revenues and reduced its loss for the period by 4% to US$ 6.4 m. However, Rediff saw some heavy spurts during the week as most analysts had still recommended a buy on this Indian ADR.

New entrant Dr. Reddy however, continued its steady climb. The pharma major has been continually stating that it will continue to focus on Research and Development of new molecules for clinical trials.

However, over the past week as the NASDAQ fell over 4%, Indian tech ADRs counters led by Infosys gained. Though Indian tech majors are expected to show a slowdown in growth, a lot of these companies are still expected to sustain a healthy grow rate. The same may not be the case for a lot of US technology companies. Though it may be too early to say this, but it sure looks like a sign that the investors are now segregating their buying actions based on regional factors.

Given the slowdown in both the Indian and US economies a sustained recovery in the Indian ADRs (especially the TMT stocks) seems to be unlikely. Added to that Sebiís recommendations on ban of carry forward transactions will also impede a recovery of the Indian bourses, atleast in the short term.

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