Global Depository Receipts (GDR)/ American Depository Receipts (ADR) prices of Indian companies increased significantly during the first eight month of 2009. This is reflected in Instanex Skindia DR Index. The index increased by 72% to 2,255.61 on August 4, 2009 from the level of 1,311.31 on January 1, 2009. Sharp increase in price of depositary receipts (ADR/GDR) has pushed the index upward. On the other hand, Sensex increased by 59.8% to 15830.98 from 9903.46 during the same period. A study of GDR index of 15 companies of which 10 are listed on the Sensex showed that all 10 Sensex companies increased in their GDR/ ADR during the study period.
Gautam Chand, CEO, Instanex said, ?During the recovery in markets, Skindia GDR Index rose more that the Sensex and has maintained that lead. This is an indication of foreign investors? demand for growth. India remains one of the few world economies with high growth and a stable political environment.? He added, ?Foreign investors prefer to gain emerging market exposure through instruments in their home market due to the ease and convenience these instruments provide. The strong performance of Indian GDRs and ADRs is normally followed by superior performance by foreign investors? favourite shares in India.?
According to an investment banker, the volatility in the Indian currency has also made it favourable for overseas investors wanting to take an exposure to India, to choose the GDR route and thereby not expose themselves to currency risk as well. From the beginning of the year, the rupee has demonstrated extreme volatility. Though the rupee has recovered and is 2% stronger since the beginning of the year, the currency had tanked as low as 8% by March 2009. Hence, the average premium in the GDR market for ?Indian paper? over domestic prices, which was 2.36% on January 1, 2009 increased to 3.01% on August 4, 2009. Significantly, Satyam Computers saw its ADR premium widen considerably during the study period. Satyam Computers ADR traded at a premium of 20.23% on January 1, 2009 as compared to 29.26% on August 4, 2009.
Most of the companies, with the exception of two, have shown an upward trend in their prices. ICICI Bank?s ADR price increased 30.6% since the beginning of the year. Other increases are shown by companies such as Dr.Reddy?s up 75.9% (73.8% in domestic market) to $ 17.24 and Tata Motors up 165.1% (159.1% in domestic market) to $11.80. Among the new economy scrip ADR prices such as Infosys Techno showed an upward trend during the study period (up 82.9% to $44.95).