Pre-Budget Optimism Lends Thrust To Indices
The GDR market rose on optimistic expectations of the Union Budget due to be presented by Finance Minister P Chidambaram on February 28. With institutional investors making their pre-Budget purchases, the Skindia GDR Index continued to rise.
The Index gained 4.64 per cent last week, and the rise is expected to gain momentum in the coming week. The GDR and the domestic markets moved in close tandem during the week - the 63 GDRs on an average gained 2.52 per cent and the underlying shares by 2.64 per cent.
The average premium commanded by the 63 GDRs over the underlying shares on February 13 was 14.37 per cent.
In the previous week, cement stocks moved into the limelight. With rumours of the cement industry being included in the list of core industries, cement stocks became a favourite among market players.
The GDRs and underlying shares of cement companies were the top performers gaining 13.17 per cent and 11.13 per cent on an average respectively.
India Cements was one of the top three gainers in GDRs and shares over the week. Investors seem to have reacted rather late to the growth shown by Gujarat Ambuja in its half-yearly results. The GDR moved up by 11.76 per cent to $9.50 and the underlying share 1.74 per cent to Rs 248.74.
Meanwhile, the high premium attracted by the East India Hotel's GDR has attracted marketmen in the GDR and domestic markets.
An increase in trading interest by foreign and domestic fund managers may be witnessed from the fact that the closing price of the GDR has changed on 85.48 per cent of the trading days in 1997 as compared to 76.19 per cent in the fourth quarter of 1996.
Also, the average domestic turnover has shot up 442.86 per cent from Rs 0.21 crore (fourth quarter of 1996) to Rs 1.14 crore (1997).
Higher trading activity has resulted in a decrease in average spread between the bid and offer of the GDR from 6.18 per cent in the fourth quarter of 1996 to 4.72 per cent in 1997.
The East India Hotel GDR and share has outperformed the Skindia GDR Index and BSE Sensex respectively in 1997. The GDR has gained 21.5 per cent to $20.25 (ex-bonus) whereas the Skindia GDR Index has gained 6.78 per cent during the same period.
The underlying share has moved up 14.51 per cent to Rs 471 whereas the Sensex has gained 13.21 per cent. Due to a greater rise in GDR price as compared to its underlying share, average premiums have shot up 89.75 per cent from 26.24 per cent in the fourth quarter of 1996 to 49.79 per cent in 1997.
The GDR has been one of the top three commanding highest premium on each day in 1997. The highest premium of 66.88 per cent was recorded on February 7. The East India Hotel's GDR is one of the six issues having a positive annualised compounded return. Top gainers over the week were Crompton Greaves, India Cements and Bombay Dyeing. While the Crompton Greaves GDR gained 15.38 per cent over $2.60 to close at $3, the India Cements GDR gained 14.58 per cent over $2.40 to close at $2.75, the Bombay Dyeing GDR gained 11.76 per cent over $4.25 to close at $4.75.