Financial Daily from THE HINDU group of publications
Monday, Oct 21, 2002
Columns - ADR Watch
Infy premium zooms over 80 per cent
K.S. Badri Narayanan
BRAVING the terrorist bombings in Bali (Indonesia), the US markets recorded handsome gains during the week gone-by as more corporates turned in better-than expected earnings growth. Companies such as Microsoft Corp and Citigroup Inc reported better sales growth, guiding the Standard & Poor's 500 Index and Dow Jones Industrial Average Index to record their largest weekly gains in more than a year.
Last week, the S&P 500 jumped 5.9 per cent to close at 884.39 and the Dow by six per cent at 8322.40. The gains were the most since the week ended September 28, 2001. The Nasdaq Composite Index scored an impressive gain of 6.4 per cent during the week to close at 1287.86.
Back home, the Bombay Stock Exchange and the National Stock Exchange also ended in the positive territory. While the BSE Sensex closed above the psychological 3000-mark at 3009.76, the NSE's S&P CNX Nifty just managed to end in the positive zone at 971.65 against the previous week close of 971.05.
Among the ADRs, the week clearly belonged to one counter Infosys Technologies. The ADR not only scored handsome gains on the US bourse, but also able to widened its premium to the underlying stock. The ADR now trades at a healthy premium of 80.49 per cent, a slight dip from intra-week high of 82.52 per cent, over the previous weekend close of 66.40 per cent. The premium crossed the 80-per cent mark for the first time since May 17, 2001. The premium narrowed to the lowest level of 35 per cent on December 13 last year.
The ADR gained over 10 per cent during the week to close at $71.6998 against the previous week close of $64.75. The domestic equity, however, gained only 2.2 per cent during the week at Rs 3844.20 (3761.25) thus explaining the deviation in the premium. The ADR last crossed the $70-mark on March 11 of this year. The US investors seemed to have been more bullish on the counter ever since Infosys declared its Q2 results recently than their Indian peers.
Satyam was also buoyant as the ADR closed at $10.26 ($9.29) with the premium almost doubled to 10.64 per cent (5.84 per cent). Satyam is scheduled to announce its September quarter number during this week (on October 23).
Wipro, which was firm ahead of the Q2 result announcement, however, lost some ground after the company announced its results, suggesting that the market was not enthused by its performance. Wipro closed at $31.10 (after touching an intra-week high of $32.09) against the previous week close of $30.49.
Other ADRs, however, were not that robust. In fact, counters such as Dr. Reddy's Lab, MTNL and VSNL recorded their new 52-week lows.
The US Court order stating that Dr. Reddy's infringed AstraZeneca Plc's patents for Prilosec, a heartburn and ulcer medication affected the sentiment for the counter. Despite Dr. Reddy's announcement that it plans to challenge the US Court ruling, the counter did not recover. Dr Reddy's closed at $15.02 ($17.48), after registering a new 52-week low of $14.80.
Talks that the Government planned to allow BSNL to take over MTNL affected the latter as it might delay the disinvestment process of MTNL. After recording a new 52-week low of $4, the MTNL ADR closed at $4.2 ($4.73).
HDFC Bank fell to $13.32 ($14.13) despite the bank announcing that its profit rose 29 per cent during the second quarter of September 2002.
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