Spreads Widen As Players Display Lack Of Interest
Poor corporate performance and the delay in taking a decision on the petroleum price hike have made foreign investors cautious and hence trading at the Indian GDR markets remained subdued last week.
There has been a decline in volatility of Indian offerings at the London markets. The volatility factor for the Skindia GDR Index dipped from 1.94 per cent (Jan-April 1997) to 0.97 per cent in May.
The lack of trading interest from fund managers has resulted in the widening of spreads between the bid and offer prices of the 64 GDRs from an average 15.05 per cent (Jan-April) to 17.72 per cent in May.
According to the Skindia GDR monitor, the expectations of a better performance by corporates in 1997-98, the positive trickle down effects of the budget proposals, falling interest rates and the possibility of a good monsoon are likely to improve market sentiment in the coming weeks.
There was hardly any positive news which would have affected the local and GDR markets last week.
On an average, 44 GDRs remained unchanged and the Skindia GDR Index moved in a narrow range of 0.67 per cent compared with 1.24 per cent for the BSE Sensex.
The Skindia GDR ended the week at 72.17 on May 29 compared with 72.65 on May 22. The index premium also dipped from 25.01 per cent to 23.99 per cent in the same period.
During the week, eight GDRs gained, 34 remained unchanged and 22 lost ground. The 64 GDRs lost 0.69 per cent against 2.37 per cent in the underlying shares.
According to the Skindia study, despite a slowdown in the offtake of vehicles in the second half, a drop in freight rates and a general slowdown in industrial growth, Telco posted strong results for 1996-97.
Net profits increased 43.84 per cent to Rs 762.36 crore and sales increased 28.6 per cent to Rs 10,097 crore.
With sales crossing the Rs 10,000-crore mark, the company emerged as the largest private sector company.
Despite this and reports of a dividend payout, the Telco GDR price did not undergo a significant change. The GDR declined 0.74 per cent to $13.40 and the underlying share increased 0.57 per cent to Rs 395.25.
Turnover in the domestic market shot up 56.44 per cent to Rs 120.02 crore. Expectations of a good performance resulted in its GDR and share price moving up 14.89 per cent to $13.50 and 3.42 per cent to Rs 393, two weeks prior to the announcement of results. During the last six months, the Telco GDR has gained consistently.
The top gainers during the week were Indo-Gulf (up 20 per cent), Ranbaxy Labs (6.1 per cent) and Bajaj Auto (6.06 per cent). The main losers were Ballarpur Industries (-16 per cent), SAIL (-13.3 per cent) and Grasim Industries (-7 per cent). The top premiums were commanded by Videocon International, Crompton Greaves and Dr Reddy's.