Average Premiums Record Six Per Cent Increase

The Indian GDR markets, after a downslide the previous week, gained ground due to renewed buying support by fund managers at the London markets. This resulted in the premia for GDRs moving up sharply last week in comparison with the previous weeks.

By the end of the week, after touching a five-month low of 69.13, the Skindia GDR index gained 6.35 per cent to close at 73.52. At the domestic markets, the BSE Sensex closed 3.38 per cent higher from its low of 3876.08 on August 29.

A sharper rise in the GDR indices has led to the average premium rising from 14.17 per cent on August 28 to 20.39 on September 4.

On September 1, the government hiked petro products prices and announced key decisions linked to the petroleum sector marking a departure from the administered price mechanism (APM) to a market determined pricing policy.

On the day, the policy was announced, the Skindia GDR index gained marginally by 0.26 per cent to 71.73. GDRs from the power and auto sector were badly hit as the hike would increase transportation and energy costs. GDRs in this sector fell by 3.32 per cent and 1.12 per cent.

In the domestic market power stocks lost at an average of 9.8 per cent compared with a fall of 5.37 per cent in the BSE Sensex.

The GDR turnover during the same period fell to Rs 2.37 crore, a drop of 33.80 per cent. The underlying shares of BSES, CESC and Tata Electric declined 9.06 per cent, 16.8 per cent and 4.16 per cent. Meanwhile, the Indian Oil GDR issue is expected to sail through. The size of the issue has almost been doubled to $600 million with the company now requiring more overseas funds to fund its petroleum imports. Its target price has been pegged at around Rs 600-700. The government has decided to off-load its holding in Container Corporation of India and it has invited presentations from investment bankers for a GDR issue of about $200 million representing 15 million shares.

The top gainers during the week under consideration included, GE Shipping which closed at $7.75 against the previous close of $6.75, a gain of 14.81 per cent.

The SBI GDR closed at $24.50 against the previous close of $21.75, a gain of 12.64 per cent. ICICI closed at $17 against the previous close of $15.25, again of 11.48 per cent.

Among the top losers during the week were, J K Corporation which closed at $1 against the previous close of $1.25, Tata Electric which closed at $325 against the previous close of $400, a loss of 18.75 per cent.

The scrips which were traded at a premium over the underlying shares were, Crompton Greaves which closed at $120.78, a premium of 77.62 per cent and Videocon International which closed at $69.54, a premium of 74.94 per cent.