Mumbai, Oct 10: A complete shakeout of investor confidence was witnessed both on the local and the GDR markets last week. The US-64 fear continued to be mirrored in panic sales by investors at even lower levels. The Skindia GDR index fell by 17.46 per cent to close at 527.19 points on October 8.The Skindia GDR premium index plunged by 42.52 per cent to close at 8.86 per cent on October 8 against its previous week's close of 15.42 per cent.
GDRs and underlying stocks of pivotals like Reliance and SBI almost quoted at par, on account of mass sales at these counters.
The average premiums of the 65 GDRs moved up from 0.65 per cent on September 24 to 2.83 per cent on October 8. The average spreads of the 37 actively traded GDRs widened from 9.62 per cent on September 24 to 11.47 per cent on October 8. Overall, the 60 GDRs declined 5.63 per cent, while the underlying stocks fell by 8.45 per cent during the fortnight.
During the week-ended October 8, the GDRs of Crompton Greaves made a sharp recovery of23.89 per cent to close at $0.80. Similarly, the GDR of Dr Reddy's flared up by 14.63 per cent to close at $11.75.
However, the GDRs of ICICI, Indian Rayon and Bajaj Auto faced heavy selling pressure, which resulted in these stocks declining substantially. While the GDRs of ICICI fell by 28.94 per cent to close at $6.88, the GDR of Indian Rayon declined by 25.41 per cent to close at $2.28 and Bajaj Auto registered a net decline of 23.69 per cent to close at $15.63.
A study conducted by Skindia Finance shows that the newly constituted Skindia GDR index saw sharp fluctuations during the period between April 1 to September 30, 1998 and moved in a wide band of 97.73 per cent as compared to 49.55 per cent in the BSE-30 Sensex.
During the same period the Skindia GDR index witnessed a volatility of 3.15 per cent against 1.98 per cent in the Sensex.
Widening spreads indicating declining liquidity was a prominent feature during the second quarter of the year. Average spreads of the 37 most actively traded GDRsincreased by 39.47 per cent to 12.34 per cent in the second quarter. The average spreads of GDRs of ITC spurted by 117.32 per cent to 5.73 per cent, Ashok Leyland by 102.65 per cent to 21.58 per cent and Raymond by 86.21 per cent to 16.47 per cent. However, the average spreads declined in the case of Indo Gulf, Bajaj Auto and VSNL by 11.43 per cent to 20.12 per cent, 5.14 per cent to 3.52 per cent and 1.96 per cent to 3.52 per cent respectively.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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