Convertibility Panel Report Gives Sentiment A Leg-Up
Trading sentiment at the Indian GDR markets improved following the recommendations placed by the Tarapore Committee on capital account convertibility. While in the previous three weeks the GDR markets had moved in a narrow range, the markets recovered last week with the 64 Indian offerings gaining marginally by 1.36 per cent. The Skindia GDR Index also moved up by over three per cent, from 72.17 on May 29 to 75.02 on June 5, the Skindia GDR monitor said.
The recommendations of the Tarapore Committee, if implemented, will give unprecedented autonomy to the RBI, speed up the financial sector reform and introduce greater fiscal discipline. The recommendations would also make it easier for Indian corporates to tap the GDR/ADR markets as they would not require prior approval by the government or the RBI.
The poor corporate results announced have affected the domestic investors sentiment leading to a fall in the Sensex of 3.06 per cent to 3685.31 for the period May 2 to May 28. On the contrary, the GDR markets were relatively stable in this period with the Skindia GDR Index increasing marginally by 0.19 per cent to 72.79. This resulted in the Skindia GDR Index premium shooting up from 17.67 per cent to 23.39 per cent in the corresponding period. With both the GDR and local market recovering during the week, the GDR premium further increased to 26.6 which is the highest level in the last one year.
During the past week, the GDRs in the aluminium sector gained by 1.19 per cent while the steel sector GDRs gained by 4.74 per cent. Raymond, which posted a much lower net profit of Rs 8.88 crore for the fiscal 1996-97, witnessed a slide in the stock price last week. The sharp fall in net profits has been attributed to the prolonged strike at its MP mills, a slump in demand and unremunerative prices for its steel and cement products. Its GDR has reported negative returns of 79.38 per cent over the last one year and 81.21 per cent in the last six months.
On announcement of the results, the Raymond GDR fell sharply by 33.34 per cent to $2.50 and the underlying share fell by 3.19 per cent to Rs 60.75, making it the top loser at the domestic and GDR markets. The scrip was quoting at a premium of 6.94 on June 3 but due to a steep fall in the GDR, it is now trading at a discount of 11.29 per cent.
There were 27 gainers at the GDR markets, another 27 remained unchanged while 10 GDRs lost ground. Amongst the underlying shares, there were 42 gainers, 3 remained unchanged and 19 lost ground.