Political uncertainty hits GDR market

It may be recalled that during the week ended February 5, while the Skindia GDR index fell by 0.76 points the 30-share Sensex slumped by 56.53 points moving in the band of 1.77 per cent and 2.45 per cent respectively. The GDRs of SPIC, MTNL and Ranbaxy Labs closed at a premium of 49.25 per cent, 40.73 per cent and 38.95 per cent respectively during the same period. The 60 GDRs on an average lost marginally 0.12 per centwhile their underlying shares lost 1.72 per cent. Among the GDRs, hotel and fertiliser sector GDRs were the only gainers which registered gains of 5.6 per cent and 4.21 per cent respectively.

The top losers were GDRs of cement, auto and textile sector which declined by 8.17 per cent, 3.54 per cent and 3.46 per cent respectively. However among the underlying stocks the hotel sector was the only gainer to record a net gain of 0.13 per cent. The top loser was cable sector which fell by 15.42 per cent during the week ended February 4. A review of the pharma sector during the first phase of 1999 conducted by Skindia Finance shows that the sector has gained strength. It may be recalled that during the fourth quarter of 1998 the pharma GDRs on an average lost 2.43 per cent while the Skindia GDR index gained 3.49 per cent during the same period. Of the four GDR pharma stocks only Ranbaxy was able to provide positive returns of 5.32 per cent in the fourth quarter of 1998, while the GDRs of Core Health, Dr Reddy’sand Wockhardt had 7.69 per cent, 4.35% and 2.99% depreciation in their stock values.

In January this year, the GDRs of pharma sector have gained 13.84% with the the highest gain registered by Wockhardt which appreciated by 19.23 per cent to trade at $ 7.75 followed by Ranbaxy at 14.75% to trade at $ 10.50. The GDRs of Dr Reddy’s and Core Healthcare moved up by 11.36 per cent and 10 % respectively. The Videsh Sanchar Nigam Ltd global depositary receipt issue, set to be priced on February 11, is headed for a low strike between a mere $8 to $10, estimated market sources familiar with trends on Friday even as the Skindia GDR index ended a gloomy week 30 points below last week’s closure. The VSNL GDR dived a further 10 cents on international bourses, as with five days to go for the pricing of the fresh issue of GDRs, the merchant bankers found book-building heavy going. There were even unconfirmed reports of queries by Indian book-runners to London-based clients, in spite of there being a separate book foroverseas buyers. This could not, however, be confirmed.

The VSNL GDR traded at $10.30 at 12 GMT on Friday. Since roadshows began on January 27, the GDR (equivalent to two equity shares) has been hammered, and has fallen as much as 4.45%. Similarly, on the local front amidst thin volumes the stock is trading at Rs 730 levels against its high of Rs 770 registered during the last week of January.

The merchant banking division of Kotak Mahindra, book runners for the Indian market, would meet the top officials of the Bombay Stock Exchange and the National Stock Exchange on February 6.