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Indian tech ADRs top

May 5, 2001

In the last fortnight, the US markets remained more or less steady. Investors in the markets are keenly waiting for the Fed’s policy meeting on May 15 when the regulators are expected to announce rate cut more aggressively. Upbeat earnings from IBM, Apple Computers, Microsoft, Nortel, Walt Disney and P&G encouraged the buying interest. On the other hand profit warnings from Compaq, JDS Uniphase, Lucent and At&T trimmed the rally.

On the economy part the news were mixed. Among the positive news, the US home sales data and consumer durable orders showed good strength. The index (showing manufacturing data) of NAPM also ticked up to 43.2 in April from 43.1 in March. Construction spending in the US rose 1.3% in March to a record US$ 854 bn per annum, from a gain of 0.9% in February. However, shaking consumer confidence, growing corporate layoffs and rising jobless claims indicated the signs of slowdown in the economy. New jobless claims rose by 9,000 to 421,000 in the week ended April 28. A weaker job market could lead to less consumer spending and undermine the recent signs of economic strength. Adding to the gloom was the fall in NAPM’s non-manufacturing index in April to 47.1 from 50.3 in March indicating the weakness in service sector.

(Price in $) 20-Apr-01 5-May-01 Change
Wipro 29.0 36.6 26.1%
Infosys 63.0 72.5 15.1%
Dr. Reddy's 11.3 12.1 7.1%
VSNL 13.4 13.7 2.2%
Satyam Infoway 4.0 4.1 2.2%
Silverline 4.1 4.0 -2.4%
ICICI 12.2 11.3 -7.1%
ICICI Bank 7.4 6.3 -15.9%
Rediff 4.2 2.8 -34.5%

Indian tech ADRs were in the limelight over the last fortnight. Wipro and Infosys were the key gainers. Both the companies have been rated as the top companies in Asia in terms of corporate governance by a leading foreign broking house. Infosys has recently entered into partnership with New York Life International for their worldwide expansion project. New York Life is expanding its insurance business throughout Asia and Infosys has been selected to design, develop, implement and deploy the solutions for the company. This is a positive signal for the company as it has gained one of the largest projects.

Dr. Reddy’s, the newly listed Indian pharma major gained smartly in the expectation of better quarterly results. The company is expected to report 84% topline growth and 34% profit growth for the first quarter of FY01. Also, its ADR is trading at a marginal discount to its domestic price.

Rediff was the major loser. The company is facing lawsuits in America. ADR holders have accused the company of concealing the fact that the portal's e-mail services were faulty and did not disclose the same at time of the IPO. Also, questions are being raised about the authenticity of educational qualifications of a board member and misleading information as regards to its advertising client base.

ICICI attracted some buying interest towards the fag end of the fortnight. The company reported a drop of 56% in profits for the year ended March ’01 thanks to higher provisions for non-performing assets. The buying interest in the stock was however; fueled by the fact that ICICI is planning to increase the provision for NPAs to 50% in the next three years, which indicates its keenness to achieve global standards.

Indices 20-Apr-01 5-May-01 Change
NASDAQ 2,163 2,192 1.3%
Dow 10,580 10,951 3.5%
Hang Seng 13,448 13,391 -0.4%
Nikkei 13,766 14,422 4.8%
BSE 3,583 3,515 -1.9%

The NASDAQ had gained 6% in the last week on the back of strong quarterly earnings from some of the tech majors and in the expectation of interest rate cut. There could be some profit booking in the coming week if the results from tech companies are not encouraging.

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