The Skindia GDR premium index also recorded a decline of 0.50 per cent to close at 15.60 points. Around 65 GDRs lost 3 per cent during the last week, while the underlying shares declined by a whopping 13.42 per cent.

Interestingly, since the fall in the underlying share market was three times that of the GDR markets, the Skindia GDR index premium shot up by 193.69 per cent to close at 11.65 per cent as against its last week's close of 3.97 per cent recorded on June 4.

The major losers during the week were GDRs of cable, textile and power sectors declining by 16.16 per cent, 15.48 per cent and 15.11 per cent respectively.

GDRs fromhotel, pharma and cement sectors, however, recorded marginal appreciation of 4.03 per cent, 2.12 per cent and 1.92 per cent respectively. Indian Hotels' GDR recovered by 12.81 per cent to close at $ 11.45 while the GDRs of Mahindra & Mahindra and Ranbaxy Labs moved up by 11.70 per cent and 8.47 per cent respectively. On June 9, the board of Ranbaxy proposed a 1:1 bonus which saw the GDR gain by 6.78 per cent to trade at $ 15.75, while its underlying share shot up by 5.09 per cent on the same day to close at Rs 619.50. During the week, 31 of the 65 GDRs touched their 52-week low, which also accompanied an expansion in the spreads between the bid and offers.

On an average the spreads of GDRs have increased by 8.64 per cent to 60.95 per cent. Spreads witnessed by the GDR of EIH expanded by 71.76 per cent to 15.27 per cent, while that of Reliance shot up by 34.59 per cent to 11.07 per cent and Telco shot up 59.46 per cent to 16.22 per cent.

Meanwhile, the move to extend forward cover to FIIs on their equityinvestments is not going to lead to them rushing in with the investments they have just taken out. In the long run, however, the move will provide a comfort level to them, felt fund managers.

The RBI has allowed FIIs to cover their equity investments in a bid to reduce volatility in the foreign exchange markets. "With effect from June 12, forward exchange facility for equity investment by FIIs will be available for incremental investments (over and above the level of investment in equity prevailing at the end of business on June 11),'' a statement issued by the apex bank said.

"Typically fund managers investing in emerging markets already factor in the currency risk along with the fundamental risk of the market at the time of investing. To that extent, the currency risk ceases to be a major deterrent," said an FII source.