The Hindu Business Line : Dr. Reddy’s, bank counters tumble

It was a mixed show by the US markets. The broad-based S&P 500 Index closed last week with a gain of 0.2 per cent, led by energy companies and banks. On the other hand, the disappointing financial performances from General Motors Corp and Exxon Mobil Corp weakened the Dow Jones Industrial Average for a second week. The Dow Jones Industrial Average slipped 0.4 per cent to 11,326.32. The yield on 10-year Treasuries fell to 3.93 per cent from 4.10 per cent. The tech-laced Nasdaq ended almost flat, but on a positive note.

Ignoring the interest rate hike by RBI, the domestic markets finished with handsome gains. The IAEA clearance of the India-US nuclear deal and value buying at lower levels seemed to have buoyed the sentiment.

However, most of the Indian counters listed on US bourses ended on a negative note. Worst among them was Dr. Reddy’s Lab, whose ADR tumbled by 9.5 per cent at $13.75 against the previous week’s close of $15.2. The counter has been on the decline trend ever since it announced its quarterly financial performance. The pharma major announced a drop of 26 per cent in net profit at Rs 134.6 crore for the quarter ended June 30, 2008 against Rs 182.5 crore it reported in the year-ago period.

The ADRs of HDFC Bank and ICICI Bank also witnessed a sharp fall after the Reserve Bank of India, in its monetary policy review, raised its key lending rate by 50 basis points to a seven-year high of 9 per cent and the cash reserve ratio by 25 basis points to check the rising inflation. It may be recalled that it was only in June that the central bank had raised the repo rate by 75 basis points in two steps and announced a 50 basis point increase in the cash reserve ratio to 8.75 per cent.

While the ICICI Bank ADR slumped 5.3 per cent, the HDFC Bank ADR tumbled by 4 per cent.

Tata Motors was the other big loser as its ADR crashed by 5.7 per cent at $9.52 ($10.1) after the company announced disappointing quarterly financial performance. The automobile major reported a 30 per cent decline in net profit at Rs 326.11 crore for the first quarter of this fiscal against Rs 466.76 crore in the same quarter last year.

Besides, the company’s vehicle sales numbers for July was also not that encouraging. Tata Motors reported a total sale of 40,729 vehicles (including exports) for July 2008, a decline of 3 per cent compared to 42,098 vehicles sold in July last year.

The ADR of MTNL also slipped 2.67 per cent to end at $5.1 ($5.24). However, the counter recovered from $4.93 to end the week at $5.10 after the Government unveiled the new third-generation (3G) policy. The new initiative by the Government provides public sector majors BSNL and MTNL an assured slot in their service areas, but they will have to match the highest bid amount in fees.

Tata Communications ADR also ended in negative at $20.55 ($21.09).

However, IT majors Infosys Technologies, Satyam Computer and Wipro closed the week on a positive note even as Patni Computers slipped.

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