Influence of ADR on Underlying Stock Prices

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1.1 Executive Summary
Globalization has opened the door for the investors to avail various investment avenues
across the globe. American Depository Receipt (ADR) is one such opportunity to the
investing community. The ADR is a proxy for the Indian shares to enable them to be
traded in the American stock exchanges. Various studies conducted on Depository
Receipts (DRs) have shown that the trading on the DR sin the foreign market has its
influence in the home country’s stock in terms of price, volatility and volume. This
interested me and this project is concerned about studying “Whether the price fluctuations
of ADR affect the corresponding Indian share prices?”
After the liberalization of the economy in 1991, the corporatist started sourcing their
capital from both domestic and foreign markets. The Indian shares cannot be directly
listed in the American stock exchanges. ADRs have been very helpful in this purpose. So
a custodian bank receives the shares as deposit and issues receipt to the market. These
receipts are issued in appropriate ratio to the shares deposited with the depository. The
market players in the stock exchanges trade these receipts.
Though the shares are traded in different markets, they have the common fundamental
factors like company’s performance, management of the company and the financial
structure of the company that influence the share prices. At the same time there are few
factors that are not same for two markets. These are market forces like interest rates,
inflation, and overall performance of the economy. Due to this a difference in price is
found between the ADRs and the corresponding share in the home country.
1.2 Problem statement
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1. The price of Indian companies’ shares traded both in Indian stock exchange and
foreign stock exchanges are not the same, they are different.
2.Does the price in the foreign stock exchange provide information indicating movement
of that share’s price in India?
1.3 Objective of the study:
• To find is there an effect on the prices of Indian securities when they are traded
outside India.
• To find whether they act as Leading or Lagging Indicator.
1.4 Scope of the study
A study may be viewed as exploratory or formal. The essential distinction between these
two is the degree of structure and the immediate objective of the study. This research is a
quantitative study, since it involves analyzing of numbers to a great numbers.
1.5 Research methodology:
 Sampling Design
The Sampling design constitutes the blueprint for the collection, measurement and
analysis of data. It aids the scientist in the allocation of his limited resources by posing
crucial choices. Research design is the plan and structure of investigation so conceived as
to obtain answers to research questions. The plan is the overall scheme or program of the
research. It includes what the investigator will do from writing hypotheses and their
operational implications to the final analysis of data.
The design is a plan for selecting the sources and types of information used to answer the
research question. It is a framework for specifying the relationships among the study’s
variables. It is a blueprint that outlines each procedure from the hypotheses to the analysis
of data.
 Sample Size

The sampling technique used to take the sample for the research is convenient sampling
technique. The companies whose stock are taken for the research purpose are selected
based on the following criteria
· Should be considered in NIFTY index calculation
· Μarket capitalization in NSE and
· Availability of share price in the American stock exchanges.
Companies taken for research:
COMPANTY DATE OF ISSUING ADR
Dr Reddy’s Lab 11/04/2004
HDFC Bank Ltd 20/07/2004
ICICI Bank Ltd 28/03/2003
Infosys Technologies Ltd 11/03/2002
Satyam Computers Ltd 15/05/2003
Tata Motors Ltd 24/10/2007
VSNL 15/08/2003
The Stock Symbol Of These In NSE And Domestic

COMPANY ADR SYMBOL NSE SYMBOL
Dr Reddy’s Lab RDY DRREDDY
HDFC Bank Ltd HDB HDFCBANK
ICICI Bank Ltd IBN ICICIBANK
Infosys Technologies Ltd INFY INFOSYSTCH
Satyam Computers Ltd SAY SATYAMCOMP
Tata Motors Ltd TTM TATA MOTORS
VSNL VSL VSNL
 Data collection

The data collected for the research purpose are secondary data. The ADR prices were
collected through YAHOO! FINANCE and through DATASTREAM website. The
corresponding share prices were closing prices of the National stock Exchange (NSE),
India and these share prices were collected through Bangalore Stock Exchange Financial
Ltd. The share prices are adjusted to Bonus Issues and dividend payments. The return is
found from the share prices. The return is calculated as follows. Return= P1/P0
The return thus found is a relative return. The natural logarithm is then found for the
return.
The correlation of the returns on ADR and the corresponding Indian shares are found
using the following formulae
Karl Pearson’s coefficient of correlation
Where., N = Number of values
Sigma X = Summation of ADR returns
Sigma Y = Summation of corresponding Indian share price return
Sigma XY = Summation of product of ADR returns and corresponding
share price returns
Sigma x2 = Summation of square of ADR returns
 Cross correlation

Cross correlation is a standard method of estimating the degree to which two series are
correlated. Consider two series x(i) and y(i) where i=0,1,2...N-1. The cross correlation r at
delay d is defined as
Where m x and m y are the means of the corresponding series. If the above is computed
for all delays d=0,1,2,...N-1 then it results in a cross correlation series of twice the length
as the original series.
There is the issue of what to do when the index into the series is less than 0 or greater
than or equal to the number of points. (i-d < 0 or i-d >= N) The most common approaches
are to either ignore these points or assuming the series x and y are zero for i < 0 and i >=
N. In many signal processing applications the series is assumed to be circular in which
case the out of range indexes are "wrapped" back within range, ie: x(-1) = x(N-1),
x(N+5) = x(5) etc.

1.6 Limitations of the Study:
· The research is limited to impact of ADRs on Indian shares.
· The research is confined only to the study of ADR prices and its impact on
Indian shares and not on the American stock market.
· The study is limited to shares of seven companies and their ADRs due to
the problem in availability of data.
· The study is limited by time constraints.

LITERATURE REVIEW
The literature review section examines recent research studies, company data, or industry
reports that act as a bass for the proposed study. Related literature and secondary data
gives comprehensive perspective. Earlier references will be helpful if the problem has a
historical background. Always the literature survey reference should be to the original
source. The literature applies to the study you are proposing. The literature review may
also explain the need for the proposed work to appraise the shortcomings and
informational gaps in secondary data sources.
The first step in a research is a search of the secondary literature. Studies made by others
for their own purposes represent secondary data. Within secondary data exploration, a
researcher should start first with an organization’s own data archives. Reports of prior
research studies often reveal an extensive amount of historical data or decision-making
patterns. By reviewing prior studies, you can identify methodologies that proved
successful and unsuccessful. The source of secondary data is published documents
prepared by authors outside the sponsor organization. A search of secondary sources
provides an excellent background and will supply many good leads if one is creative.
2.0 Background of the study:
A Depository Receipt (DR) is a type of negotiable (transferable) financial security that is
traded on a local stock exchange but represents a security, usually in the form of equity
that is issued by a foreign publicly-listed company. The DR, which is a physical
certificate, allows investors to hold shares in equity of other countries. One of the most of
DRs is the American depository receipt(ADR),which has been offering companies,
investors and traders global opportunities for investment since the 1920s. Since then, DRs
have spread to other parts of the globe in the form of global depository receipts (GDRs)—
the other most common type of DR--European DRs (EDRs), and International DRs
(IDRs).

2.1 How Does the Depository Receipt Work?
The DR is created when a foreign company wishes to list its already publicly-traded
shares or debt securities on a foreign stock exchange. Before it can be listed to a
particular stock exchange, the company in question will first have to meet certain
requirements put forth by the exchange. Initial public offerings (IPOs) ,however, can also
issue a DR as well. DRs can be traded publicly or over-the-counter. Let us look at an
example of how an ADR is created and traded:
Example
Say a gas company in Russia has fulfilled the requirements for DR listing and now wants
to list its publicly-traded shares on the NYSE in the form of an ADR. Before the gas
company's shares are traded freely on the exchange, a US broker, through an international
office or a local brokerage house in Russia, would purchase the domestic shares from the
Russian market and then have them delivered to the localh(Russian) custodian bank of the
depository bank. The depository bank is the American institution that issues the ADRs in
America. In this example, the depository bank is Bank of Newyork. Once the Bank of
Newyork’s local custodian bank in Russia receives the shares this custodian verifies the
delivery of the shares by informing the Bank of Newyork that shares can now be issued in
the U.S. The Bank of New York then delivers the ADR’s to the broker who initially
purchased them.
Based on a determined ADR ratio, each ADR may be issued as representing one or more
of the Russian local shares, and the price of each ADR would be issued in US dollars
converted from the equivalent Russian price of the shares being held by the depository
bank. The ADRs now represent the local Russian shares held by the depository, and can
now be freely traded equity on the NYSE.
After the process whereby the new ADR of the Russian gas company is issued, the ADR
can be traded freely among investors and transferred from the buyer to the seller on the
NYSE, through a procedure known as intra-market trading. All ADR transactions of the
Russian gas company will now take place in US dollars and are settled like any other US
transaction on the NYSE. The ADR investor holds privileges like those granted to
shareholders of ordinary shares, such as voting rights, and cash dividends. The rights of
the ADR holder are stated on the ADR certificate.
When any DR is traded, the broker will aim to find the best price of the share in question.

He or she will therefore compare the US dollar price of the ADR with the US dollar
equivalent price of the local share on the domestic market. If the ADR of the Russian gas
company is trading at USD 12 per share and the share trading on the Russian market is
trading at USD 11 per share (converted from rubles to dollars), a broker would aim to buy
more local shares from Russia and issue ADR s on the US market. This action then
causes the local Russian price and the price of the ADR to reach parity. The continual
buying and selling in both markets, however, usually keeps the prices of the ADR and the
security on the home market in close rage of one another. Because of this minimal price
differential, most ADR s are traded by means of intra-market trading.
A US broker may also sell ADR’s back into the local Russian market. This is known as
cross-border trading. When this happens, an amount of ADR’s is cancelled by the
depository and the local shares are released from the custodian bank and delivered back to
the Russian broker who bought them. The Russian broker pays for them in rubles, which
are converted into dollars by the US broker.
A depositary is a bank that provides stock transfer services in connection with a
depositary receipt program, including issuing and canceling ADR’s, maintaining the
register of holders, distributing dividends in U.S. dollars, providing annual meeting
services and executing corporate actions.
Investor receives annual reports and proxy materials in English. ADR’s listed on U.S.
exchanges provide holders with the same level of information as any other U.S. security.
Trading information is readily available, financials are reconciled to U.S. Generally
Accepted Accounting Principles (GAAP) and the SEC regulate the Company's disclosure
to investor. Information on OTC ADR’s is more limited as trading data is not well
publicized, company financials do not conform to U.S .standards and the SEC does not
require companies to communicate with share holders on a regular basis.

2.2 Benefits of DR issue
The DR functions as a means to increase global trade, which in turn can help increase not
only volumes on local and foreign markets but also the exchange of information,
technology, regulatory procedures, and market transparency. Thus, instead of being faced
with impediments to foreign investment, as is often the casein many emerging markets,
the DR investor and company can both benefit from investment abroad.
 For the company
A company may opt to issue a DR to obtain greater exposure and raise capital in the
world market. Issuing DR s has the added benefit of increasing the share's liquidity while
boosting the company's prestige on its local market ("the company is traded
internationally"). Depository receipts encourage an international shareholder base, and
provide expatriates living abroad with an easier opportunity to invest in their home
countries. Moreover, in many countries, especially those with emerging markets,
obstacles often prevent foreign investors from entering the local market. For more on
emerging market economies (EME s), see the article "What Is an Emerging Market
Economy?" which focuses on what EME s are and why they are drawing the attention of
foreign investors. By issuing a DR, a company can still encourage investment from
abroad without having to worry ,about barriers that a foreign investor might face.
company can still encourage investment from abroad without having to worry about
barriers that a foreign investor might face.
 For the investor
Buying into a DR immediately turns an investors' portfolio into a global one .Investor's
gain the benefits of diversification, while trading in their own market under familiar
settlement and clearance conditions. More importantly, DR investors will be able to reap
the benefits of these usually higher-risk, higher-return equities, without having to endure
the added risks of going directly into foreign markets, which may pose lack of
transparency or instability resulting from changing regulatory procedures. It is important
to remember that an investor will still bear some risk due to foreign exchange rate
conversions, stemming from uncertainties in emerging economies and societies. On the

other hand, however, the investor can also benefit from competitive rates the US dollar
and euro have to most foreign currencies. Investing in any security involves a certain
amount of risk - along with reward. However, risks specific to ADRs might include
country risk, as ADRs are backed by non-U.S. securities, and currency risk.
2.3 Sponsored v/s. Un-Sponsored ADRs
Sponsored ADRs offer the easiest method for foreign companies to issue securities in the
United States; they are tradable on the New York Stock Exchange or the over-the-counter
market. The underlying companies usually supply fundamental information on their
business, just like most American companies. Also, exchanged listed companies must
provide better financial information than un-sponsored ADRs and non-exchange listed
ADRs. To qualify for listing, foreign companies must complete extensive filings with
United States governing bodies and provide financial reports similar to those of domestic
companies.
On the other hand, un-sponsored ADRs are created without the consent of the underlying
foreign company, and at one time commanded the majority of available ADRs. Now they
are becoming less and less popular because the foreign companies do not report their
financial information to the United States, making research more difficult for investors.
These securities may be handled by more than one bank and are not listed on American
exchanges.
2.4 What is the difference between registered holder and Beneficial
ADR holder?
A registered holder is one whose name appears on the books of the depositary. The
registered holder is considered the owner of record. A beneficial holder is one whose
holdings are registered in a name other than their own, such as in the name of a broker,
bank or nominee.
Introduced to the financial markets in 1927, an American Depository Receipt (ADR) is a
stock that trades in the United States but represents a specified number of shares in a
foreign corporation. ADRs are bought and sold on American markets just like regular
stocks, and are issued/sponsored in the U.S. by a bank or brokerage.

ADRs were introduced as a result of the complexities involved in buying shares in foreign
countries. Primarily the difficulties associated with trading at different prices and
currency values. For this reason, U.S. banks simply purchase a bulk lot of shares from the
company, bundle the shares into groups, and reissues them on the NYSE, AMEX, or
NASDAQ. The depository bank sets the ratio of U.S. ADRs per home country share. This
ratio can be anything less than or greater than one. The reason they do this is because they
wish to price the ADR high enough as to show substantial value, yet low enough, so that
the individual investors can purchase these shares. Most investors try to avoid investing in
penny stocks, and many would shy away from a company trading for 50 Russian Rubles
per share, which equates to $1.50 US per share. As a result, the majority of ADRs range
between $10 and $100 per share. If, in the home country, the shares were worth
considerably less, then each ADR would represent several real shares.
2.5 There are three different types of ADR issues:
Level- 1 - This is the most basic type of ADR where foreign companies either don't
qualify or don't wish to have their ADR listed on an exchange. Level-1 ADR s are found
on the OTC market and are an easy and inexpensive way to gauge interest for its
securities in North America. Level- 1 ADR s also have the loosest requirements from the
SEC.
Level- 2
This type of ADR is listed on an exchange or quoted on NASDAQ. Level- 2 ADRs have
slightly more requirements from the SEC but they also get higher visibility trading
volume.
Level 3
The most prestigious of the three, this is when an issuer floats a public offering of ADRs
on a U.S. exchange. Level 3 ADR s are able to raise capital and gain substantial visibility
in the U.S financial markets.
The advantages of ADRs are twofold. For individuals, ADRs are an easy and cost
effective way to buy shares in a foreign company. They save considerable money by
reducing administration costs and avoiding foreign taxes on each transaction. Foreign
entities like ADRs because they get more U.S. exposure and allow them to tap into the
wealthy North American equity markets. In return, the foreign company must provide
detailed financial information to the sponsor bank.

2.6 How ADR Prices are determined?
Now, let's use an example to give you a better idea about how the ADR process works.
The recent boom in "Bloody Marys" has increased the prospects for the vodka industry.
Russian Vodka Inc. wants to list shares on the NYSE to gain exposure to the U.S. citizens
and to tap into the lush Bloody Mary market .Russian Vodka already trades on the
Russian Stock Exchange at 127 Russian Rubles ($4.58 US). Let's say that a U.S. bank
purchases 30 million shares from Russian Vodka Inc. and issues them in the U.S. at a
ratio of 10:1. This means each ADR share you purchase is worth 10 shares on the Russian
Stock Exchange. A quick calculation tells us that the new ADR should have an issue price
of around $45.80.
How is the performance determined? It floats on supply and demand just as normal stocks
do. But, if the U.S. price varies too far from the Russian price after taking into account
the currency exchange rate and the ratio of ADRs to home country shares then an
arbitrage opportunity will exist. ADRs do tend to follow the general trend of the home
country shares, but this is not always the case.
2.7 What are the risks associated with ADR prices?
There are several factors that determine the value of the ADR beyond the performance of
the company. Analyzing these foreign companies involves further scrutiny than merely
looking at the fundamentals. Here are some other risks that investors should consider
 Political Risk
Ask yourself if you think the government in the home country of the ADR is stable? For
example, you might be wary of Russian Vodka Inc. because of the past history in Russian
politics.
 Exchange Rate Risk
Is the currency of the home country stable? Remember the ADR shares track the shares in
the home country, and if their currency is devalued, it trickles down to your ADR. This
can result in a big loss even if the company had been performing well.

 Inflationary Risk
This is an extension of the exchange rate risk. Inflation is the rate at which the general
level of prices for goods and services is rising, and subsequently purchasing power is
falling Inflation can be a big blow to business, the currency of a country with high
inflation becomes less and less valuable each day.
2.8 Indian Companies Listed in New York Stock Exchange (NYSE)
1. Dr. Reddy's Laboratories Limited
2. HDFC Bank Limited
3. ICICI Bank Ltd.
4. ICICI Limited
5. Satyam Computer Services Ltd.
6. Silverline Technologies Ltd
7. Silverline Technologies Ltd
8. Videsh Sanchar Nigam Limited
9. Wipro Limited
2.9 Indian Companies Listed in NASDAQ
1. Infosys Technologies Limited
2. Rediff.com India Limited
3. Satyam Info way Limited (SIFY) - Listed: 19/10/1999
2.10 Indian Companies Listed in the London Stock Exchange
1. APTECH
2. Ashok Leyland
3. Bajaj Auto
4. BSES
5. CESC
6. Crompton Greaves
7. EID-Parry (India)
8. EIH
9. Gas Authority of India

10. Himachal Futuristic Communications
11. Indian Hotel Companies
12. J.K.CORP
13. Mahanagar Telephone Nigam
14. Raymond
15. SIEL
16. SSI
17. State Bank of India
18. Steel Authority of India
19. Tata Tea - Listed: 5/06/2000
2.11 Study conducted by Kate rina Holica of Chezclovakia
The literature on the ADRs is scant. There have been quite few studies regarding the
effect of fluctuation of global Depository Receipts on the corresponding domestic shares
in the home country. These research works were mainly on focused on studying the
change in the volatility and volume of trade of these shares in the domestic market; due to
the fluctuations in the American market In this regard the study conducted by Kate rina
Holica of Chezclovakia is important.
In her study, Kate rina Holica studied
 3 Czech, 3 Hungarian and 3 Polish stocks, to which DRs have been issued
 Found that the prices of depositary receipts and their underlying shares are
very closely correlated.
 Found that for all Czech and Hungarian shares the correlation coefficient
was above 0.99 and
 For two of the Polish shares lower values.
Dr Kate rinaHolic ká in her research sample included 19 DR issues by Central European
companies - from Chezklovakia Republic, Poland and Hungary. The research findings
were as follows
I. Liquidity effects
Cross listing may enhance liquidity of the actual shares on the local market:

· Increased visibility of the company
· Reduction in the information asymmetry (better analysts’ coverage)
· Possibility of cross-border trading.
II. Spill over effect on the local stock market
· International cross-listing can alter incentives of companies and individuals to
participate in the market and can that way contribute to transformation of a segmented
local equity market with low liquidity to an integrated market with high liquidity and
capitalization.
• On the other hand, concerns are frequently expressed that migration of major share of
market capitalization and value traded from small emerging stock exchanges to leading
financial centers has adverse consequences on the overall quality of the local market.
· The whole market activity development is thus tightly connected with the behavior of
the two shares. We can therefore not easily differentiate between the market wide and
stock-specific influences.
2.12 Based on the above findings she concluded her study as follows
· The DR and underlying share’s prices of CE companies turned out to be almost
perfectly correlated; hence there don’t seem to be many opportunities for profitable
arbitrage. Such a result supports the hypothesis of markets integration
· It is usually expected that a DR issue lowers cost of capital to the company; lower cost
of capital implies higher shareholder value, which is reflected in the DR Price.
· A range of different DR types has evolved to satisfy the needs of all investors and
issuers. The most frequently chosen approach by the CE companies was a simultaneous
offering to institutional investors in the US and in London.
A research paper was submitted by Dr. Mahu Kalimpali and Dr. Latha Ramachand to the
National stock Exchange (NSE) of India. In their paper Dr Mahu Kalimpali and Dr Latha
Ramachand studied 49 firms’ equity issues. Dr Mahu Kalimpali and Dr Latha Ramachand
examined volatility of returns, volumes and price range measures for a

Www.projectskart.com sample of Indian
firms that raise equity capital on foreign markets.
They found that
· On average there is a decline in returns, volatility of daily high/low price range of the
firm’s equity on the local market subsequent to the foreign capital raising event.
· Volatility of the underlying returns is higher after the equity issue.
· Exposure to a foreign capital market via equity issue and listing does not result in a
significant improvement in liquidity on the home market compared to firms that do not
have this foreign exposure.
· Given the firms that raise capital abroad are generally larger firms issuing significantly
greater amounts of equity, the results suggest that foreign exposure via listing or issue
may not be an available option to small firms.
2.13 Based on a study of 113 ADRs from eight countries over the 1980-1994 periods,
Jiang (1998) reports three findings.
1. The ADRs outperform their respective local market indices.
2. The ADRs are influenced by their respective market index portfolios, while, for
countries with co-integrated ADRs and market portfolios, the effect of the ADRs on local
market portfolios is significant.
3. Third, although the ADR returns are significantly correlated with US returns, they are
also affected by local market conditions and exchange rates, indicating diversification
benefits of the ADR’s through two sources: a country diversification and a currency.
They conclude that the ADR’s, especially those in emerging markets, offer significant
international diversification benefits to US investors.
2.14 Mr. Khutan and Zhou find the following in their study.
1. Underlying, local, and host markets all are important predictors of the ADRs returns.
2. In terms of the conditional volatility, we find that only underlying markets have a
significant impact on the volatility of the ADRs.

Www.projectskart.com 3. US shocks have no
significant impact on the conditional volatility (risk) of the ADRs
To profit out of that price fluctuation one need to consider the foreign exchange rate
fluctuations too. In Germany two people conducted a study to find out where the price
discovery occurs during the overlapping trading hours of NYSE and FRANKFURT stock
exchanges. In their study they found that
1. The price discovery occurs largely in the domestic market to even out the arbitrage
opportunity.
2. Multinational firms would have more room for international price discovery than that
are essentially operating in the home market alone.
3. Home markets largely determining the random walk component of the international
value of the firm along with an independent role for exchange rate shocks to affect prices
in the derivatives market.
On 31-December-2009, in The Business Line newspaper the following newsprint
appeared.
During the year 2009, the price movements of American Depository Shares and Global
Depository Receipts listed in the overseas markets appear to have generally mirrored the
movements in prices of underlying securities at the local markets.
On an average, while the price decline in the case of ADRs and GDRs was 24.8 per cent,
the prices of underlying securities fell by around 25.7 per cent.
However, the average masks a number of cases in which divergent price trends were
evident. On top of the list are GDRs such as Flex Industries, Ballarpur Industries, Garden
Silk, EID Parry, SI Viscose and Ispat Industries. These GDRs out-performed the price
movements in the underlying stocks. Bottom of the pile are GDRs/ADRs such as EIH,
Bombay Dyeing, Finolex Cables, ITC and Gas Authority. In the case of these stocks, the
ADRs/GDRs under-performed the price movement in the underlying stocks. These price
movements have tended to realign the premium/discount at which these instruments trade
overseas noticeably.
GDR/ADR PERFORMANCE DURING YEAR 2009

Price Change In Year 2009 Price Change In Year 2009
Stock
GDR/ADR Stock GDR/ADR
Flex Industries 225.0 74.8 India Cement -41.7 -30.2
Garden Silk 217.5 -34.7 FINOLEX Cables -42.3 -2.7
EID Parry 112.0 -43.4 Century Tiles -44.4 -28.9
Ballapur Industries 93.3 4.9 GNFC -45.3 -43.2
HFCL 78.4 81.9 INDO RAMA -46.0 -35.1
GE Shipping 52.1 76.4 Core Parenterals -48.0 -63.7
Raymond 45.0 69.6 Jain Irrigation -48.0 -62.4
TATA Power 14.6 26.2 Crompton Greaves -48.0 -41.8
Reliance 14.5 45.4 GRASIM -48.1 -29.9
Indian Aluminum 8.5 27.5 Indo gulf -48.5 -32.3
BSES 5.5 4.7 Indian Hotels -48.8 -25.8
HDC 0.0 -65.9 SAIL -50.0 -46.5
JK Corp 0.0 -42.3 VSNL -51.3 -50.4
Oriental Hotel 0.0 -35.9 Tube Investments -52.2 -46.2
ITC -2.6 36.0 Kesoram Industries -55.8 -43.0
Gujarat Ambuja -6.2 -2.1 United Phosphorous -56.0 -45.8
SI Viscose -13.3 -61.6 IPCL -57.0 -41.4
Bombay Dieing -14.5 40.5 SIEL - 57.1 -51.2
Dr Reddy’s -15.9 -9.8 Arvind Mills -59.1 -42.1
Ispat Industries -19.2 -54.4 DCW -61.2 -56.8
Hindalco -23.2 -9.1 JCT -62.5 -54.5
ICICI ADR -24.2 -1.7 Telco -64.0 -56.9
ICICI -25.5 -1.7 Gas Authority -64.1 -27.7
Ranbaxy labs -25.9 -27.3 Ashok Leyland -64.4 -61.5
CESC -26.7 -30.6 SPIC -65.6 -60.3
MTNL -29.4 -8.1 Infosys ADR -71.4 -23.3
Videocon Intl -30.0 -30.3 M&M -72.4 -65.2
Indian Rayon -30.0 -20.1 L&T -74.2 -64.9
SBI -3308 -16.5 EIH -75.6 9.7
Sanghi Polyester -35.0 -64.8 Pentamedia Graphics -82.2 -78.3
BAJAJ Auto -38.7 -32.0 SATYAM -85.2 NA
INFOWAY
Fresh GDR Or ADR Offers (In %)

Price Change after Offer
GDR OR ADR STOCK
WIPRO 20.5 0.6
VSNL 13.1 23.7
ICICI BANK -43.7 -44.6
APTECH 46.3 -39.2
TATA TEA -51.9 -48.7
SILVERLINE -60.0 -50.1
REDIFF.COM -77.1 NA
SSI -79.7 -74.5
The difference in the performance of VSNL and WIPRO over the other fresh offers has a
direct correlation with the timing of the offers. WIPRO and VSNL made their offers at
the fag end of the year when the prices in the local markets were already at more realistic
levels and, as such, further declines in price compared to the offer price have been
averted. The other ADR/GDR offering were made in the earlier part of the year. Their
prices were linked to the domestic market price even at the time of the offer, with the
price fixed in the region of 10 per cent above or below the domestic price. And, not
surprisingly, just as their prices crashed at the domestic markets, the prices of the ADRs
and GDRs also tumbled.
2.15 Mr. Ajay Sharma in his research says the following.
We have preponderant evidence, and conceptual arguments, in favor of large- scale
ownership of local firms by foreign shareholders. For example, it makes great sense for
Indian investors to buy shares of foreign companies: doing so would yield improved
diversification and hence low risk for Indian investors. By the same coin, Indian equity
risk is uncorrelated with global portfolios, so foreign investors require a lower rate of
return from Indian equities. Thus, foreign ownership of Indian equity reduces the cost of
capital in India, and makes more investment projects viable
How can foreign investment into Indian equities be implemented? Broadly, there are two
strategies: either foreign investors can buy Indian shares in India, or Indian firms can list
their shares abroad in order to make these shares available to foreigners.
Foreign investors buying shares in India has traditionally been limited by two
Problems:

1. The first problem faced is poor market design on the Indian equity market. When
foreign investors first appeared in India, in the early 1990s, they were horrified at the
equity markets that they saw. The Indian equity market imposed extremely large
transactions costs upon investors (i.e., it was highly illiquid). This was an obvious
motivation for GDRs and ADRs: Indian firms saw these as a way to bypass the
incompetent Indian equity market mechanisms and instead jump to the well-functioning
equity markets found abroad. When Indian firms issued shares on the GDR or ADR
markets, their shares commanded a higher price owing to a liquidity premium.
2. The second problem faced is restrictions on equity ownership by foreigners. Only
"foreign institutional investors" can buy shares in India, while anyone can buy GDRs or
ADRs. FIIs face restrictions on the fraction of a firm that can be purchased. This imposes
ceilings on foreign ownership. In contrast, participation in the GDR or ADR market is
unencumbered, and hence GDRs or ADRs generally enjoy a premium.
From 1994 onwards, with the rise of electronic trading, clearing corporation and
depository, the first order mistakes in market design in India have been addressed. The
Indian equity market has obtained a quantum leap in liquidity. We are still inferior to
international standards in a few respects, such as the rolling settlement, The presence of
leveraged trading on the spot market, and the limited access to derivatives. However, the
picture on liquidity has turned around completely. It is easy to examine the `market by
price' on NSE, and compare it with the bid/offer spreads seen for GDRs or ADRs: we see
sharply higher liquidity on NSE. From1996 onwards, there has been no liquidity premium
argument which favors offshore listing.
This superiority of liquidity in India is not accidental. The liquidity of the stock market is
ultimately driven by retail investors and speculators, who are found in the home country,
in Indian standard time. Hence, no foreign market can ever harness the liquidity which is
found in India. Indeed, a firm which issues ADRs or GDRs actually suffers an
opportunity cost by listing abroad: if it had (instead) issued shares domestically, it would
have improved local liquidity and obtained a liquidity premium. Instead, issuance abroad
fragments the order flow and yields no improvement to local liquidity.
In this conceptual framework, what is the optimal policy for a firm which operates under

existing Indian regulations and laws, and seeks to obtain the highest possible valuation?
We can propose a few ingredients:
· As far as possible, it is better for a firm to issue shares in India, and obtain good
liquidity by building up market capitalization and retail investors in India.
· Foreign investors would always be willing to pay higher prices for Indian shares, so it is
important to woo FIIs. The companies with the largest fraction of foreign ownership
would obtain the highest P/Es and the lowest cost of capital. Towards this goal, the
company should pass the special resolution which raises the limit upon FII shareholding
from 24% to 40%.
· When the company hits the limit of 40% FII shareholding, it makes sense to use ADRs
or GDRs as a way of further improving foreign shareholding. The benefits here (of
greater foreign ownership giving an improved valuation) are diminished to the extent that
GDRs and ADRs are extremely illiquid. The two--way fungibility, announced in the
budget speech, will help improve the liquidity of ADRs or GDRs, but there is no
possibility of an ADR or GDR being as liquid as NSE.
· Conversely, there is no real argument in favor of GDR or ADR issuance for an Indian
firm which has not yet hit the 40% limit.
The above recipe is appropriate for a firm in India which faces existing economic
policies. Suppose we could change these economic policies, and try to find the economic
policy strategy which would yield the lowest possible cost of capital for the firms of
India. What would we undertake?
· Foreign investment brings capital into India, and reduces the cost of capital for a firm.
From the perspective of economic freedom, the shareholders of a firm should be free to
choose whom they sell shares to. The sale of a share is a private action between one
investor and another. This budget has made a step in the right direction by allowing
shareholders to increase the limit on FII shareholding from 30% to 40%. However, this
limit should be raised to 100%. A firm should be free to sell shares to anyone it wants; the
Government of India should not have a say in this matter.
· The definition of "FII" should be steadily broadened, so as to improve the investor base
that all Indian companies can access. This would eliminate the incentive that Indian firms

are given, to suffer poor liquidity in offshore markets, in order to obtain a wider foreign
investor base.
Ranking of countries which have issued ADRs by Mr. James M Donald, Lazard Asset
Management Company

How the GDRs/ADRs of Indian
Companies Fared
(Sunday, October 29, 2009)
Current Current RETURNS OVER
Company
GDR Premium/ offer price
the
Week
Price Discount $Terms $Terms
E 35 15
I(Rs
53
(%)
.)
SBI D
1
14
1
Silverline ADR
P
17
G E Shipping
6
80
a 0 5
Ashok Leyland
r
11r 3
SPIC
y 7
60
5

(%) (76)
(
(%) 25 17
(73)
7
33
21
(51) 9
(34)
(87) ) 31 20

Arvind Mills 16 74 (96) 17
Ranbaxy Laboratories 859 21 94 13
Grasim Industries 252 24 (58) 10
L & T 164 4 (57) 8
ITC 861 14 146 7
United Phosphorous 69 19 (93) 7
Tube Investments 73 5 (76) 7
East India Hotels 218 10 (49) 6
Reliance Industries 310 2 66 5
SSI 2519 9 (62) 5
G A I L 50 11 N.A. 5
Rediff ADR 97 N.A (65) 5
M T N L 137 (0) (50) 4
Bajaj Auto 344 29 (56) 4
Indian Hotels 202 3 (73) 4
Gujarat Ambuja 149 13 118 3
Bombay Dyeing 128 10 (70) 2
Infosys Technologies ADR 11839 64 660 2
Mahindra & Mah. 149 12
IPCL 61 21
Hindalco 737 (2)
Tata Tea 183 6
SIV Industries 23 484

(27) (59) 2 0
(71) (97) 1 0
1 1

Wockhardt 893 142 36 0
T E L C O 80 11 (88) 0
Sanghi 5 (7) (95) 0
Usha Beltron 64 38 (87) 0
Raymond Woollen 103 1 (58) 0
SAIL 7 37 (83) 0
NEPC Micon 11 450 (92) 0
Oriental Hotels 115 43 (80) 0
SIEL 8 61 (95) 0
Kesoram Industries 39 119 (47) 0
Flex Industries 23 21 (88) 0
Finolex Cables 229 5 (40) 0
GNFC 23 3 (80) 0
H D C 11 179 (88) 0
Garden Silk Mills 10 28 (96) 0
DCW 8 122 (94) 0
CESC 23 24 (95) 0
Ballarpur Industries 115 52 (71) 0
Century Textiles 34 22 (94) 0
Crompton Greaves 34 46 (90) 0
Core Healthcare 23 100 (96) 0
India Cements 39 11 (80) 0
Indo Gulf Fertilizers 46 31 (78) 0

Indian Rayon 69 3 (90) 0
J K Corp 27 118 (93) 0
ICICI ADR 179 141 99 0
Jain Irrigation 23 192 (95) 0
JCT 6 53 (93) 0
Ispat Industries 9 154 (91) (0)
Aptech 394 (9) (40) (1)
ICICI 78 5 (26) (1)
Dr.Reddy's 1420 1 178 (3)
Himachal Futuristic 1122 (5) 954 (4)
Videocon International 55 33 (85) (4)
Indian Aluminium 110 20 (65) (4)
VSNL 719 11 (44) (6)
Tata Power 62 (9) (81) (7)
BSES 183 3 (17) (8)
Satyam Infoway ADR 352 N.A. 71 (14)
ICICI Bank ADR 115 (0) (55) (15)
Sterlite 160 2 (80) (85)

According to Bank of NewYork the following chart has been found.

PROFILE OF COMPANY
3.0 INDUSTRY SCENARIOS
3.1 INTRODUCTION:
Basically, Securities markets provide a channel for allocation of savings by an individual or
an organization to those who have a productive need for them. So, a security market can be
said a location where the savers meet the real investors who need the fund. The savers and
investors are constrained by the economy’s abilities to invest and save respectively which
thus helps market in enhancing savings and investment in the economy. Stock Market is
therefore affected by the dynamics of the economic, political, cultural and environmental
activities within the country and rest of the world.
A stock market is a public market for the trading of company stock and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The size of the world stock market was estimated at about $36.6 trillion US at the
beginning of October 2008. [1]
The total world derivatives market has been estimated at about
$791 trillion face or nominal value, [2]
11 times the size of the entire world economy. [3]
The
value of the derivatives market, because it is stated in terms of notional values, cannot be
directly compared to a stock or a fixed income security, which traditionally refers to an actual
value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet'
on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.).
Many such relatively illiquid securities are valued as marked to model, rather than an actual
market price.
3.2 BRIEF HISTORY: Indian Share Market is the oldest Asian stock market
incorporated in 1875. The name of the first share trading association in India was Native
Share and Stock Broker's Association which later came to be known as Bombay Stock
Exchange. This association started with 318 members.
The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history to
the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai's Town

Hall. The location of these meetings changed many times, as the number of brokers
constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875
became an official organization known as 'The Native Share & Stock Brokers Association'.
In 1956, the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act.
The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to
measure overall performance of the exchange. In 2000 the BSE used this index to open its
derivatives market, trading Sensex futures contracts. The development of Sensex options
along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading
platform.
Today, BSE is the world's number 1 exchange in terms of the number of listed companies
and the world's 5th in transaction numbers. The market capitalization as on December 31,
2007 stood at USD 1.79 trillion . An investor can choose from more than 4,700 listed
companies, which for easy reference, are classified into A, B, S, T and Z groups.
The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature,
and is tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The
SENSEX is constructed on a 'free-float' methodology, and is sensitive to market sentiments
and market realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral
indices.
Three segments of the NSE trading platform were established one after another. The
Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market
(CM) segment was opened at the end of 1994. Finally, the Futures and Options segment
began operating in 2000. Today the NSE takes the 14th position in the top 40 futures
exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior
Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50
stocks from 25 different economy sectors. The Indices are owned and managed by India
Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with
Standard & Poor's.

In 1998, the National Stock Exchange of India launched its web-site and was the first
exchange in India that started trading stock on the Internet in 2000. The NSE has also proved
its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage
Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP
magazine (1999).
The past decade has been quite remarkable for the Securities market in India with the boom
in the economy fuelled by better banking system. It has grown exponentially and the market
has also witnessed fundamental institutional changes. There have also been significant
improvements in efficiency, transparency and safety.
However global economic activity decelerated towards the end of the calendar year resulting
in investment concerns on account of the sub-prime crisis in the US and other developed
nations. Naturally the effects of this slowdown spilled over into developing economies also
and we are looking ahead with some degree of concern over the prospects in the near future.
In recent days economic collapsed in variation of the foreign investors fund main effect of
the Indian economy in 2008-2009 the Bombay Stock Exchange (BSE) the sensex was 13,400
in the month of 8th
July 2009. In other side National Stock Exchange (NSE) 3,974 is in the
same month of 2009.
Since the markets has taken up word moment from 9th
July 2009 from the low of 3,974 to
4,578 on 24th
July 2009 due to the Sharpe recovery in global economy as well as the 1st
quarter Results of all major company which has been announced better than expectations,
Hence Indian markets are one of the fastest emerging markets in world and attracted by many
Foreign institutional investors,
3.3 THE REGULATORY AUTHORITY: SEBI The rise in number of investors
was also leading to an increase in malpractices on part of the companies, brokers, merchant
bankers, investment consultants and various other agencies involved in new issues. This led
to erosion of investor confidence. The Government and the stock exchanges Realizing this,
Securities Exchange Board of India (SEBI) was constituted were helpless as the existing
legal framework was just not enough. by the Government of India in 1992

 THE MAJOR FUNCTIONS OF SEBI:
1. To promote fair dealings by the issuers of securities and ensure a market place where funds
can be raised at relatively low costs.
2. To provide protection to the investors and safeguard their rights and interests such
that there is steady flow of savings into the market.
3. To regulate and develop a code of conduct and fair practices by the intermediaries
involved in the stock market etc.
 Outlook 2009- 10
The Indian markets traded in a very narrow range during April amidst mixed cues coming
from global and domestic markets. While the markets were hurt by the sovereign debt default
concerns of Greece and SECs allegations against Goldman Sachs, it found some comfort
from good set of FY 2009-2010earnings numbers declared by India Inc...
India’s industrial output, as measured by the Index of Industrial Production (IIP), grew by
15.1% as against an annual gain of 16.7% in January 2010, and17.6% in December 2009.
Industrial production grew by a mere 0.2% in the same month last year. Manufacturing
output rose by 16% as against a mere 0.2% in February 2009, while Mining production was
at 12.2% versus (-) 0.2% in the year-ago period. Electricity sector output expanded by
6.7%compared to just 0.7% in the same month a year Consumer Durables production
expanded by 29.9%in February 2010 as against 6% in the same period in 2009. Output in
Capital Goods grew by 44.4% in February 2010 as against 11.8% for the same month of
2009. The growth rate in Basic Goods category stood at 8.4% versus a contraction of 0.1% in
the year-ago period. Intermediate Goods' output rose by15.6% in the month under review
versus (-) 3% in the year-ago period. As many as 14 out of the 17 industry groups showed a
positive growth during February 2010 compared to the corresponding month of the previous
year.
.

3.5 COMPANY PROFILE
Company History & Background
Asit C. Mehta Investment Intermediates Ltd. (ACMIIL) was established in the year 1986
with a view to offer a one stop solution to Indian entities for their needs in financial services.
Over the last two decades it has achieved the distinction of being amongst the most trusted
and reputed brokerage houses in India. It provides a complete bouquet of products in equity,
debt, commodities, forex, depository, derivatives and allied services in India.
Asit C. Mehta Investment Interrmediates Ltd. (ACMIIL) is the most trusted and reputed
brokerage house for providing investment-related services in the capital market and money
market and depository services in India.
The company is jointly promoted by noted stock market professionals, Mr. Asit C. Mehta
and Mrs. Deena A. Mehta, and is a part of the Mumbai-based Nucleus Group of Companies.
The other group companies are engaged in IT and IT related services such as development of
databases, back-office applications for banks, corporate document management solutions and
geographical information systems (GIS).
ACMIIL has pan-India presence through its branches, business associates, and marketing
agents. You can also become a part of this growing business and assist us in increasing
investor base, spreading investor education, and providing capital market services to clients.
3.6 VISION, MISSION & QUALITY:
Envisioned to be the “Trusted Financial Intermediary”, the group has etched out a very
specific corporate purpose – “To reach appropriate financial products, services and solutions
to every Indian entity.”
3.7 PURPOSE
To reach appropriate financial products, services and solutions to every Indian entity
3.8 Our Belief

 That every household can, should, and will need to participate in the
financial markets directly or indirectly to protect their financial interests
 That regulatory/legal compliance ensures economic sustainability.
 That transparency and fairness are the cornerstones of all dealings.
 That knowledge rather than capital is the key driver of this business.
 That product, process, and technology led innovations are necessary preconditions for
continuously adding value for all our constituents.
3.9 The first to our credit:
 First limited liability Company to acquire membership on Bombay Stock Exchange.
 First multiple seat holder and multiple exchange members.
 First to achieve the ISO quality certification for business processes.
 First to receive a CRISIL grading for quality of operations and services.
 Company Managing Director Mrs. Deena Mehta was the first lady to be elected to the
governing board of the Stock Exchange Mumbai and first and only lady to be the
President of Stock Exchange, Mumbai.
3.10 Values, Relationship…..core to our business
We are currently expanding our business in the retail and institutional segments on the
domestic and overseas (NRI/FII) fronts. We have select positions open for marketing, sales,
research, back office operations, and business development activities.
At Asit C. Mehta, we aim to select a candidate whose goals are aligned with ours.
Knowledge about the product, a conceptual understanding of the financial markets, a thirst to
innovate, desire to grow within the company, meticulousness towards the task on hand, an
ability to design and follow process are all qualities valued in the company.
We foster a culture that rewards talent, initiative, hard work, and accountability and nurtures
teamwork.
3.11 Shareholders

Asit C Mehta Investment Interrmediates Ltd.(ACMIIL) is incorporated as a publicly held
limited liability company in India under the Indian Companies Act, 1956. The company was
incorporated in the year 1993 under the new enabling provisions for limited liability stock
broking companies framed by the Government to encourage limited liability company in this
area. ACMIIL was first such company on the Bombay Stock Exchange.
Currently, the company is mostly held by its founder shareholders as follows:
 Mr.Asit C Mehta
 Mrs.Deena Asit Mehta
 Mr.Kirit H Vora
 Nucleus Netsoft & GIS (India) Ltd.
3.12 SERVICE STANDARDS & COMPLIANCE:
In order to institutionalize business processes, our company has moved to a documented
customer-centric quality management system. This has ensured that the entire organization is
driven by the common objective of delivering quality brokerage services that would create a
unique brand and top-of-the-mind recall. We are the first brokerage house to be certified
under ISO 9001:2000 for the Equity and Debt segments. We are also first stock brokerage
house to be graded under the Broker Grading service by Credit Rating & Information
Services of India Ltd. (CRISIL) for our quality of operations and services provided to clients.
3.13 MANAGEMENT:
Chief Executive Officer
Whole-time Director
:
:
Mrs. Deena Asit Mehta
Mr. Kirit H Vora

3.14 ORGANIZATION STRUCTURE
DESIGNATION NAME
Chairman and Managing Director Mr. Asit C. Mehta
Chief Executive Officer Mrs. Deena Asit Mehta
Whole-Time Director Mr. Kirit H Vohra
Chief Operating Officer Mr. Kirit H Vohra
Chief Technological Officer Mr. Kamal Goel
Chief Officer Wealth centre Mr. T .S Netrajan
Chief Manager Co-operative commodities Mr. Vidia
Chief Financial Manager Mr. Veerendra Thakur
Chief Officer Human Resources Mr. V. Vishvanath
Senior Vp Operation Mr. T .S Netrajan
Branch Manager Mr. Kapadia
Unit Manager Mr. B.P Shanthish
3.15 ORGANISATION STRUCTURE:

3.16 MEMBERSHIP:
• Cash Market: BSE, NSE
• Derivatives: BSE, NSE
• Debt: NSE
• Foreign Exchange: Accredited by FEDAI
• PMS under SEBI License
• Merchant Banking: Approved by SEBI under Category I
• Commodities: NCDEX MCX, DGCX, EAST INDIA
Clearing Bank: State Bank of India
Reach and Access (as on July 01, 2009)
Investment Centers 665 (branches, franchisee, etc.)
States & UT covered 26
Employees 1002
3.17 PRODUCTS AND SERVICES:

· Equity – Initial Public Offering (IPO)
· Equity – Secondary trading (cash and derivative)
· Equity – PMS
· Equity – Online Trading
· Equity – Depository Services
· Equity – Investment Advisory (fundamental and technical)
· Equity – Mutual Fund
· Equity - Arbitrage
· Commodity - Derivatives
· Debt – Government Securities
· Debt – Primary Placements
· Debt – Advisory
· Debt – Mutual Funds
· Debt – Relief bonds, etc.
· Forex – Interbank broking
· Merchant Banking – Amalgamation & Mergers
· Merchant Banking – Private Equity Merchant Banking – Public Offering.
3.18 OUR SERVICES:
 Equity and Derivatives Trading:

Equity trading is offered to retail clients through different channels in the Bombay Stock
Exchange (BSE) & the National Stock Exchange of India (NSE), for the cash and the
derivatives segments. Investors are serviced through a PAN India network of over 650
associates / locations comprising of 585 franchisee and 65 company branches. (as on July
2009)
 Online Trading:
Investmentz.com is our trading portal that offers online trading to retail investors in the BSE
and NSE cash and derivatives segments. The investors can do their own trading through a
browser-based interface as well as a streamer-based solution called Live exchange. This
service is also available through an Interactive Voice Response (IVR) facility for those
clients who are unable to access the Internet service at any time. The company has tied up
with leading nationalized, private and co-operative banks to offer share trading services to
the banks' customers. A seamless gateway has been established between the banking and
depository software of the bank.
 Institutional Desk:
Equity trade execution services are provided to institutional investors both domestic and FII
by our institutional desk. Research and market.
 Investment Banking:
ACMIIL has been granted a Category I Merchant Banking license by SEBI. It offers services
in mergers, amalgamations, private equity, public offerings and a full gamut of investment
banking services.
 Commodity Trading Service are Provided Through Our Associate:
Asit C. Mehta Commodity Services Pvt. Ltd. The company is member of India’s premier
commodity exchanges, namely, the Multi Commodity Exchange of India Ltd. (MCX), the
National Commodity & Derivatives Exchange, India (NCDEX) and the East India Cotton
Exchange Association (EICA). The online trading portal also provides facility to trade on
NCDEX. One of the group company is a member of Dubai Gold & Commodity Exchange
(DGCX).
 Inter-Bank FOREX Desk:

Our associate company, Asit C Mehta FOREX Pvt. Ltd., undertakes inter-bank forex order
execution. Accredited by the Foreign Exchange Dealers’ Association of India (FEDAI), the
company is empanelled with approximately 60 banks and has a reasonable presence in the
market.
3.19 SUPPORT SERVICES
 Research:
Investors are provided with extensive information on markets and companies through hourly
market reviews, periodic market commentary and recommendations, which enable them to
make informed decisions. The company firmly believes that providing continuous and
accurate decision making tools can add substantial value to its investors.
 Advisory Services:
Advisory services are provided as a value-added service to all retail and institutional clients.
This service is delivered through the hourly, daily, weekly, fortnightly and monthly
publication of fundamental and technical research. Calls are made through broadcast services
on our private VSAT network, SMS and e-mail.
 Accounts Information:
Accounts information to the retail clients is provided through access on our website. This
assists clients in knowing details about their trading accounts and their resultant obligations
through various reports like Bill, Contract, Financial Ledger, Transaction Register, Stock
Register, Portfolio Tracker, Stock holding position, etc. E-contracts are generated for
investors giving trade details.
3.20 OTHER SERVICES:
 Price Ticker

ACMIIL, in association with Capital Market Publications, presents the
equity/derivative/commodity price ticker for easy desktop access to capital market
information. The prices reflected are generally delayed by five minutes, and any additional
delay (if any) depends on the user’s connectivity and computer system configuration. You
can customize the ticker as per your individual needs.
 Alertz
As our registered client, Investmentz.com provides you with ‘Alertz’ facility on your email
SMS and assists you in your investment decision, thus enriching your capital market
investment experience through us.
Investmentz.com’s Alertz service keeps you informed about stock prices through email and
SMS. You may activate the Email Alertz service and track your selected stocks/indices
without monitoring the trading terminal during market hours. It is now very easy to track the
prices of your selected stocks without deviating from normal activities .The SMS Alertz
service is available for trade confirmation, fund pay-in and pay-out, market views/calls, etc,
to clients who actively use our trade execution services.
As general information, Investmentz.com does not guarantee any accuracy of generation,
databases, and delivery timings, and does not make any claims of any nature in this matter
The critical components to avail the Alertz service are:
a) Internet connectivity / bandwidth speed at your end,
b) Information feed available from the exchange,
c) Computing speed of the Alertz, and
d) Speed of your Internet Service provider (ISP) and/or domain provider and/or Telecom
service provider (TSP).
 Advice Me
To service general retail investor and assistance them in systematic creation of wealth, we
could try to provide you with some basic / brief investment idea on stock of your interest.
You could ask us an investment question related to a particular stock or sector and we would

see that brief research (fundamental / technical) input could be provided on that stock or
sector.
Whatever may be our research input on your inquiry, still the final investment decision
would need to be taken by you as you know your investment profile & habits, risk appetite,
income – cash flow, person / family / social obligation, etc.
3.21 Potential Growth Areas:
India is amongst the least affected countries in the 2008 global meltdown. May 2009 general
election in the country provided a fairly stable government. We see great potential for the
country in general and financial market in particular in the years to come. Investor
participation, product innovations, volume growth is likely to be in exponential proportion.
Our company is well poised to build a great institution in India to service the Indian and
global investors for their financial services needs The company has created a strong
organization driven by processes to handle multifold volume growth.
 Do not disturb:
To service our clients and aide them in wealth creation process, we at Asit C Mehta
Investment Intermediates Ltd. keep on sending information about our products and services,
information related to capital market investment, etc. This information might be sent /
conveyed to you via letter, newsletter, email, phone; SMS, etc. based on our assumption that
you would need this information and benefit you in your wealth creation process. But, at
times, you might need privacy and wish us not to contact you for such information. We
would take the precaution and see not to disturb you by excluding your contact details from
our marketing list. Kindly provide your details so as to not disturb you.
 Message Board:
Welcome to our new website! We are pleased to announce some exciting new features, an
improved user-friendly design and services to benefit our esteemed customers. We have also
taken steps to ensure faster loading of pages.
 User-friendly design:

No part of the website is more than three clicks away. This ensures speedy access to
whatever information you may need.
 Easy Trading:
We have two options for trading: Quick Trade and Regular Trade. Quick Trade enables you
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member of the Bombay Stock Exchange Proven track record for the last 25 years in
the stock broking industry First broking house to gain the ISO 9001:2000 certification
Presence in 23 states and 650 locations.
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3.24 SWOT ANALYSIS:
SWOT analysis refers to, analyzing the strength, weakness, opportunity and threat of the
organization SWOT is a compound of two factors namely external factors and Internal
factors. Strengths and weaknesses are the internal factors controlled by the technical and
personnel departments. Opportunities and threats are the external factors which cannot be
controlled by the company . External factors may include political
factors, Socio –Cultural factors, Technical factors, demography, Environmental factors.

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WEAKNESS:
 Less number of branches in South India.
 Unable to compete with the brokerage rates of their competitors.
 Lack of efficient and effective strategies in attracting customers.
OPPORTUNITIES:
 Growing India economy opens up huge market for stock broking companies.
 Increase the resource mobilization by mutual funds.
 Introduction of new technologies leads to trapping new markets.
 Company is committed to achieve profitable progress consistently.
 Targeting rural and sub urban areas.
THREAT:
 Facing Increased level of competition.
 Uncertainty in the market.
 Changes in government polices and regulation.

DATA ANALYSIS AND INTERPRETATION:
AUTO CORRELATION FOR ADR PRICES AND NSE STOCK PRICES
LAGS 1 2 3 4 5 6
COMPANY MARKET
6
-0.061 -0.031 0.001 -0.034 -0.023 -0.0041
Dr. Reddy's Lab ADR -(1.9) -(0.09) (0.03) -(1.06) -(0.71) -(1.28)
0.01 -0.062 -0.028 0.003 -0.009 -0.037
NSE (0.31) -(1.93) -(0.87) (0.09) -(0.28) -(1.16)
-0.21 -0.063 -0.016 -0.009 0.017 -0.057
HDFC bank ADR -(0.63) -(1.9) -(0.48) -(0.27) (0.51) -(1.72)
-0.139 -0.05 0.046 -0.029 -0.008 0.006
NSE (4.21*) -(1.51) (1.39) -(0.87) -(0.24) (0.242)
-0.006 -0.034 0.069 0.015 -0.014 0.045
ICICI bank ADR -(0.18) -(1.06) (2.15*) (1.59) -(0.43) (1.4)
NSE
0.055 -0.025 0.004 0.015 -0.017 0.008
(1.71) -(0.78) (0.12) (0.46) -(0.053) (0.25)
ADR
0.061 -0.109 -0.037 -0.016 0.017 -0.027
INFOSYS TECH (1.9) (3.4*) -(1.15) (0.5) (0.53) -(0.84)
NSE
0.02 -0.027 -0.01 -0.001 -0.04 -0.019
(0.62) -(0.84) -(0.31) -(0.03) -(1.25) -(0.59)
ADR
-0.008 -0.082 0.051 0.01 -0.032 -0.071
SATYAM COMP -(0.24) (2.48*) (1.59) (0.31) (0.31) -(1.)
NSE
-0.009 -0.036 0.03 0.003 -0.049 -0.092
-(0.27) -(1.09) (0.93) (0.09) -(1.53) (2.87*)
TATA MOTORS
ADR
-0.011 0.1 -0.14 -0.41 -0.037 -0.019
-(0.12) (1.12) -(1.59) (0.46) -(0.42) -(0.21)
NSE
0.037 0.103 -0.089 0.004 -0.041 0.098
-(0.41) (1.15) -(1.01) (0.04) -(0.46) (1.12)
ADR
0.028 -0.064 0.046 0.077 -0.048 -0.011
VSNL (0.87) -(2.) (1.43) (2.4) (1.5) -(0.34)
NSE
0.059 0.001 -0.015 0.014 -0.026 -0.017
(1.84) (0.03) -(0.46) (0.43) -(0.81) -(0.53)
Values given in brackets represent ‘t’ values
* refers to ‘t’ value significant at 5% level

LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
7 8 9 10 11 12
MARKET
-0.019 0.049 0.007 0.01 -0.015 0.053
ADR -(0.59) (1.53) (0.02) (0.31) -(0.46) (1.65)
-0.08 -0.0001 0.064 0.008 -0.015 -0.009
NSE (2.5*) -(0.03) (2.) (0.25) -(0.46) -(0.28)
0.026 -0.062 -0.025 0 0.083 -0.006
ADR (0.78) -(1.87) -(0.7) (0.) (2.51*) -(0.18)
-0.024 -0.018 -0.016 0.02 -0.07 -0.004
NSE -(0.72) -(0.54) -(0.48) (0.6) (2.12*) -(0.12)
-0.043 -0.083 -0.006 0.025 0.002 -0.028
ADR -(1.34) (2.59*) -(0.18) (0.78) (0.06) -(0.87)
0.032 0.015 0.009 -0.012 -0.045 -0.046
NSE -(1.) (0.46) (0.28) -(0.37) -(1.4) -(1.43)
0.023 0.02 -0.06 0.014 0.062 -0.013
ADR (0.71) (0.62) -(1.87) (0.43) (1.9) -(0.4)
-0.003 0.003 -0.021 -0.016 0.015 0.011
NSE -(0.09) (0.09) -(0.65) -(0.5) (0.46) (0.34)
0.001 0.049 -0.037 0.019 0.063 0.009
ADR (2.21*) (0.03) -(1.15) (0.59) (1.96) (.28)
0.006 0.031 -0.047 0.013 0.01 0.034
NSE (0.18) (0.96) -(1.46) -(0.4) (0.31) (1.06)
-0.034 0.184 -0.117 0.076 0.096 0.063
ADR -(0.39) (2.17*) -(1.36) (0.88) -(1.12) (0.74)
-0.041 -0.144 -0.095 0.005 -0.008 0.048
NSE -(0.47) (1.6) -(1.1) (0.05) -(0.09) (0.56)
-0.027 0.024 0.14 -0.039 -0.024 0.015
ADR -(0.84) -(0.75) (0.43) -(1.21) (0.75) (0.46)
0 -0.022 -0.069 -0.048 -0.011 0.01
NSE (0.) -(0.68) (2.15*) -(1.5) -(0.34) (0.31)

LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
13 14 15 16
MARKET
0.013 -0.016 -0.044 -0.037
ADR (0.4) -(0.5) -(1.37) -(1.15)
-0.014 0.056 0.016 0.023
NSE -(0.43) (1.75) (0.5) (1.)
-0.034 -0.031 -0.024 -0.061
ADR -(1.03) -(0.93) -(0.72) -(1.84)
-0.034 -0.045 0.009 0.035
NSE -(1.03) -(1.36) (0.27) (1.06)
-0.041 0.031 0.006 0.004
ADR -(1.28) (0.96) -(0.18) -(0.12)
-0.009 -0.032 -0.027 -0.032
NSE -(0.28) -(1.) -(0.84) -(1.)
-0.029 -0.03 -0.029 0
ADR (0.9) -(9.37) -(0.9) (0.)
0.008 -0.017 -0.017 0.003
NSE (0.25) -(0.53) -(0.53) (0.09)
-0.04 -0.026 0.021 -0.015
ADR -(1.25) -(.81) (.65) -(.46)
-0.022 -0.016 -0.036 0.03
NSE -(0.68) -(0.5) -(1.12) -(0.93)
-0.047 0.029 -0.088 -0.044
ADR -(0.55) -(0.34) -(1.04) (0.53)
-0.053 0.038 -0.117 0.036
NSE -(0.62) (0.45) -(1.39) (0.43)
0.03 -0.041 -0.03 -0.005
ADR (0.93) -(1.28) -(0.93) -(0.15)
0.041 0.004 -0.53 0.029
NSE (1.28) -(0.12) (1.65) (0.9)
· refers to ‘t’ value significant at 5% level

CROSS CORRELATION BETWEEN NIFTY AND ADR AND CROSS
CORRELATION BETWEEN ADR AND THE NSE STOCK
LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
-10 -9 -8 -7 -6 -5
MARKET
0.017 0.005 0.01 -0.026 -0.004 0.049
N-A (0.53) (0.16) (0.31) (0.81) -(0.13) (1.53)
0.043 -0.036 0.038 -0.029 -0.015 -0.026
A-S (1.34) (1.13) (1.19) (0.91) (0.47) (0.81)
0.024 -0.018 -0.083 -0.011 -0.015 -0.043
N-A (0.71) -(0.53) (2.52*) -(0.33) -(0.45) -(1.3)
0.025 -0.068 0.008 -0.025 -0.007 0.015
A-S (0.74) -(2.) (0.24) -(0.76) -(0.21) (0.45)
0.01 0.004 0.008 0.007 -0.018 0.011
N-A (0.31) (0.13) (0.25) (0.22) -(0.56) (0.34)
-0.011 0.009 -0.01 -0.013 0.063 -0.025
A-S -(0.34) (0.28) -(0.31) -(0.41) (1.97) -(0.78)
-0.004 0.001 -0.008 -0.042 0.054 0.052
N-A -(0.13) (0.03) (2.5*) -(1.31) (1.69) (1.63)
0.032 -0.03 0.012 -0.011 0.006 -0.049
A-S (1.) -(0.94) (0.38) -(0.34) (0.19) -(1.53)
0.047 -0.044 -0.04 0.007 -0.012 -0.011
N-A (1.47) -(1.33) -(1.21) (0.21) -(0.36) -(0.34)
0.02 -0.049 0.05 0.008 -0.036 -0.053
A-S (0.61) -(1.48) (1.52) (0.24) -(1.09) -(1.61)
0.016 0.035 0.06 -0.106 -0.112 -0.013
N-A (0.17) (0.37) (0.65) -(1.14) -(1.22) -(0.14)
-0.014 -0.096 0.138 -0.05 0.064 -0.013
A-S -(0.15) -(1.02) (1.48) -(0.54) (0.7) -(0.14)
-0.031 -0.021 0.007 0 0.125 0.084
N-A -(0.97) -(0.66) (0.22) (0.) (3.91*) (2.63*)
-0.035 -0.108 -0.022 0.042 -0.032 0.013
A-S -(1.09) (3.38*) -(0.69) (1.31) -(1.) (0.41)

LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
-4 -3 -2 -1 0
MARKET
-0.002 0.032 0.024 0.031 -0.024
N-A -(0.06) (1.) (0.75) (0.99) -(0.75)
-0.032 0.017 -0.018 -0.001 0.274
A-S -(1.) (0.53) -(0.56) -(0.03) (8.56*)
0.062 0.072 -0.081 0.088 0.338
N-A (1.88) (2.18*) -(2.45*) (2.67*) (10.24*)
-0.006 0.042 0.045 0.017 0.317
A-S -(0.18) (1.27) (1.36) (0.52) (9.61*)
0.088 0.052 -0.062 0.1 0.336
N-A (2.75*) (1.63) -(1.94) (3.13*) (10.5*)
0.021 0.056 0.037 0.001 0.069
A-S (0.66) (1.75) (1.16) (0.03) (2.16*)
0.052 -0.043 -0.064 0.188 0.317
N-A (1.63) -(1.34) -(2.) (5.88*) (9.91*)
0.002 0.028 0.007 -0.017 0.317
A-S (0.06) (0.88) (0.22) -(0.53) (9.91)
2 0.099 0.022 0.13 0.466
N-A (2.) (3.) (0.67) (3.94*) (14.12*)
A-S
-0.02 0.055 -0.019 0.015 0.622
-(0.61) (1.67) -(0.58) (0.45) (18.85*)
0.203 -0.142 0.049 0.196 0.616
N-A (2.21*) -(0.14) (0.54) (2.15*) (6.84*)
-0.025 -0.042 0.071 0.088 0.796
A-S -(0.27) -(0.46) (0.78) (0.97) (8.84*)
-0.029 0.106 0.336 -0.015 -0.062
N-A -(.91) (3.31*) (10.5*) -(.47) -(1.94)
A-S
0.117 -0.009 -0.018 0.043 0.5
(3.66*) -(0.28) -(0.56) (1.34) (15.63*)

LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
1 2 3 4 5
MARKET
0.033 -0.002 -0.65 0.044 0.06
N-A (1.03) -(0.06) (20.31*) (1.38) (1.88)
0.234 -0.023 -0.042 0.039 0.016
A-S (0.73) -(0.72) -(1.31) (1.22) (0.5)
0.041 -0.038 0.047 0.065 -0.006
N-A (1.24) -(1.15) (1.42) (1.97) -(0.18)
0.146 -0.089 0.023 -0.009 0.038
A-S (4.42*) -(2.7*) (0.7) -(0.27) (1.15)
0.037 0.003 0.046 0.015 0.001
N-A (1.16) (0.09) (1.44) (0.47) (0.03)
0.517 0.151 -0.001 1 0.056
A-S (16.16*) (4.72*) -(0.03) (1.) (1.75)
0.01 -0.015 0.014 -0.015 -0.051
N-A (0.31) -(0.47) (0.44) -(0.47) -(1.59)
0.167 -0.051 -0.026 1.25 0.002
A-S (5.22*) -(1.59) -(0.81) (1.25) (0.06)
-0.016 -0.034 0.024 0.024 -0.04
N-A -(0.48) -(1.03) (0.73) (0.73) -(1.21)
0.125 -0.023 0.077 0.01 -0.057
A-S (3.79*) -(0.7) (2.33*) (0.3) -(1.73)
0.066 0.066 -0.05 0.12 -0.106
N-A (0.73) (0.73) -(0.55) (0.13) -(1.15)
0.083 0.0991 -0.144 0.025 -0.543
A-S (0.91) (1.09) -(1.58) (0.27) -(0.54)
0.065 0.053 -2.125 -0.032 0.036
N-A (2.03*) (2.53*) -(2.13*) -(0.03) (1.13)
0.24 0.001 0.049 0.026 -0.02
A-S (7.5*) (0.03) (1.53) (0.81) -(0.63)

LAGS
COMPANY
Dr. Reddy's
Lab
HDFC bank
ICICI bank
INFOSYS
TECH
SATYAM
COMP
TATA
MOTORS
VSNL
6 7 8 9 10
MARKET
-0.055 0.038 0 0.071 -0.018
N-A -(1.72) (1.19) (0.) (2.22*) -(0.56)
-0.03 -0.016 0.045 0.019 0.027
A-S -(0.94) -(0.5) (1.41) (0.59) (0.84)
-0.084 0.059 0.026 -0.02 0.002
N-A -(2.55*) (1.79) (0.79) -(0.59) (0.06)
-0.012 0.007 -0.0833 0.006 0.017
A-S -(0.36) (0.21) -(2.52*) (0.18) (0.5)
-0.011 0.015 -0.001 0.006 0.053
N-A -(0.34) (0.47) -(0.03) (0.19) (1.66)
0.047 0.02 0.001 -0.021 0.001
A-S (1.47) (0.06) (0.03) -(0.66) (0.03)
-0.029 0.027 0.036 0.029 0.22
N-A -(0.91) (0.84) (1.13) (0.91) (6.88)
-0.03 -0.005 0.038 -0.011 0.016
A-S -(0.94) -(0.16) (1.19) -(0.34) (0.5)
-0.047 -0.008 0.077 -0.01 0.019
N-A -(1.42) -(0.24) (2.33*) -(0.3) (0.58)
-0.08 -0.012 0.052 -0.034 0.016
A-S -(2.42*) -(0.36) (1.58) -(1.03) (0.48)
N-A
-0.021 -0.028 0.046 0.003 -0.137
-(0.23) -(0.3) (0.49) (0.03) -(1.46)
0.042 0.024 0.155 -0.101 0.027
A-S (0.46) (0.26) (1.67) -(1.07) (0.29)
0.017 0.023 0.029 -0.028 0.039
N-A (0.53) (0.72) (0.91) -(0.88) (1.22)
0.125 -0.009 -0.017 -0.039 -0.005
A-S (0.125) -(0.281) -(0.531) -(1.219) -(0.156)

4. ANALYSIS AND INTERPRETATION:
4.1 Cross correlation
Cross correlation is run for seven companies in the following ways.
1. Between S&P CNX NIFTY returns and the ADR returns for each company (this shows
how much the NIFTY and ADR prices are correlated. This is mainly due to the industry,
economic and political factors.),
2. Between ADR returns and the returns of the corresponding shares in the domestic
market (this shows how much the ADR and the NSE quote are correlated and how well
they move in tandem. This is mainly due to the factors that are specific to the company
and the industry.) and
3. The cross correlation is run at lag of 10 days. T-value is computed for the correlation
values at various lags by dividing the correlation value with the standard error.
The significance in positive lag of the NIFTY-ADR will imply that ADR price fluctuation
is a LEADING indicator and of the ADR-NSE quote will imply that ADR price
fluctuation is a LAGGING indicator. The significance in negative lag of the NIFTY-ADR
will imply that ADR price fluctuation is a LAGGING indicator and of the ADR-NSE
quote will imply that ADR price fluctuation is a LEADING indicator. This can be
summarized as follows.
+ VE LAG - VE LAG
LEADING LAGGING NIFTY ADR
LAGGING LEADING ADR NSE
From the results we find the following in each company.

1. Dr. Reddy’s Lab : The T-values at the 0th
lag, 3rd
lag and 9th
lag are greater than two,
i.e., the correlation is significant at 9th
lag. This means that the price change of NIFTY
index, of National Stock Exchange of India, on Day 1 will be reflected on the 9th
day in
the Dr. Reddy’s Lab ADR price. So in this case ADR price is a LEADING indicator to
NIFTY. At the same time the T-value at lag zero is 8.23 in the case of ADR-NSE quote
and therefore highly significant in case of the ADR- NSE share price relationship. This
means that any fluctuation in the prices of Dr. Reddy’s Lab ADR is reflected on the NSE
quote on the same day. Its influence is immediate.
2. HDFC Bank: The T values of lags -8, -3, -2, -1 and 0 are greater than two and
therefore they are significant. Since the significance is found in the minus lags, it is to be
understood that the influence of NIFTY index is more on the price of HDFC Bank ADR .
The fluctuation on NIFTY index today will influence the HDFC Bank ADR within the
next three days. Therefore the ADR is LAGGING indicator to NIFTY. At the same it is
found that at lag zero, lags 1 of the ADR- NSE relationship the T-value is highly
significant. This means that any price fluctuation in the NSE will immediately influence
the HDFC Bank’s ADR price for the next two days. Here too the ADR is LAGGING
indicator to ADR-NSE quote for HDFC Bank’s stock.
3. ICICI Bank : The T-value is significant in -4,-1 and 0 lags in ADR-Nifty cross
correlation. The significance in the negative lags show that the NIFTY index fluctuation
today will influence the ICICI Bank’s ADR price four days later. Since the significance in
the zero lag is more, there are more chances that ADR price fluctuation will immediately
influence the NIFTY index. In case of ADR- NSE quote of ICICI Bank the significance
is high on 0, 1st
and 2nd
lags. This means tha influence of fluctuation of NIFTY index is
immediate on prices of ICICI Bank’s ADR and is found for continuous two days. Here
too ADR is a LAGGING indicator to ADR-NSE quote to ICICI Bank’s stock.
4. INFOSYS TECHNOLOGY
The T-value is significant in -1 and 0 lags. The significance in the negative lag and

the zero lag points out that the ADR price fluctuation of INFOSYS Technology’s
ADR influences the NIFTY index immediately. The NIFTY index is very sensitive to
the movement of price fluctuations of INFOSYS’ ADR. In this case ADR is a
LEADING indicator to NIFTY index. The T-value for lag 0 and lag 1 is very high and
is highly significant, in the case ADR-NSE quote. This shows that the INFOSYS’
ADR price movement influences the NSE quote for INFOSYS’ Technology’s
share on the day of price fluctuation itself. Here too ADR is a LEADING indicator to
ADR-NSE quote for Infosys technology’s stock.
5. SATYAM Computers:
The T-value for the lags -4, -3, -1 and 0 are highly significant since they are more than
two. ADR is a LAGGING indicator to NIFTY index. The significance in the negative
lags implies that the NIFTY index is being influences the SATYAM Computer’s ADR
price.This influence will occur in 3rd and 4th days after the fluctuation. The T-value for
the lags 0 and 1are very high, in the case of ADR-NSE quote. They are significant and
ADR is LAGGING indicator here
6. TATA Motors: The T-value for the lags -1 and 0 are significant. They are
LAGGING indicator to NIFTY index. The NIFTY fluctuation today will influence the
TATA MOTORS ADR tomorrow. The T-value for lag zero is greater than 2 and
significant, in the case of ADR-NSE quote. This means than the price fluctuations of Tata
motors is immediately reflected on the ADR price of TATA motors.
7. VSNL : The T value for the lags -6, -5, -3 and 0 is greater than two. They are highly
significant. The ADR acts as LAGGING indicator to NIFTY index. The price of VSNL’s
ADR is affected by the NIFTY index fluctuation. The T-value for ADR-NSE quote is
greater than two and hence significant. This shows that ADR is LAGGING indicator to
the NSE quote of VSNL’s stock.
4.2 Auto correlation
The T-value is significant, if T >=2. This means that the returns have got a pattern within

themselves and it’s not a random walk. It violates the rules of random walk. If it is a
random walk it means that the prices of the shares are determined by the information
available to the participants in the market.
In our result we find that the ADR returns of Dr.Reddy’s Lab, HDFC Bank, Infosys
Technology, Satyam computers and VSNL do not have any significant value, i.e., all T-
value are lesser than two. This means that the price fluctuations of these ADRs are not
auto correlated.
The T > 2 in the 3rd
lag of ICICI BANK ADR and T > 2 in the 8th
lag of TATA Motors
ADR in their respective correlation. These two ADR’s have a pattern in their price
fluctuations and they are correlated to a significant level.
The T = 2 in the 9th lag of the Dr.Reddy’s Lab’s stock, which is traded in the domestic
market. The price movements in the domestic market trading of Dr. Reddy’s Lab’s share
are auto -correlated. The domestic shares of ICICI Bank do not have auto correlation in
their fluctuations.
5. FINDINGS SUGGESTIONS AND CONCLUSIONS

5.1 Findings
The following important points have been found
1. The null hypothesis, that, there is NO relation between ADR price fluctuations and the
price fluctuations of the underlying Indian shares in Indian stock exchanges, is rejected
and the alternate hypothesis, that, there is relation between ADR price fluctuations and
the price fluctuations of underlying Indian shares in Indian stock exchanges, is accepted.
2. The ADR being the leading and lagging indicator mainly depends on the economy,
industry and the stock in question.
3. ADR is LEADING indicator to NIFTY index most of the time.
4. The influence of ADR price fluctuations on the corresponding share in the domestic
market is immediate, in many cases. This is because of development in the information
technology. This can be observed from the table that almost all zero lags’ T -value is
significant.
5. The influence of ADR price fluctuations on the NIFTY index is relatively to slow.
This can be observed from the table that T-value being significant at higher lags on the
positive side or at lower lags at negative side.

5.2 Suggestions:
· Better analysis tools should be used to make better predictions.
· The clients must be advised not to make their opinion while trading, as a wrong
position can prove to be very risky.
5.3 Conclusion:
Any commodity which is traded in two different market trades in different prices. This gives
rise to arbitration and price discovery. In absence of arbitration opportunities, it helps in
understanding the movement of prices. The trading in ADR in U.S. stock exchanges does this
function very well. The ADR provides as information about the movement of the share prices
in India based on the economy and other factors. The ADR price fluctuations act either as
LEADING or as LAGGING indicator. This depends upon the industry and other political
factors that are involved. The investor community can use this to their best.

Bibliography:
Textbooks and Journals
1. Alexander, G.C., C. Eun and S. Janakiramanan, 1987, Asset Pricing and Dual Listing on
Foreign Capital Markets: A Note, Journal of Finance, 42, 151-158
2. Chowdhry, B and V. Nanda, 1991, Multi-market Trading and Market Liquidity, Review of
Financial Studies, 3, 483-5111
3. Karolyi, A., 1998, what happens to stocks that list shares abroad? A survey of evidence
and its managerial implications, NYU Salomon Brothers Center Monograph series, Volume
7, #1.
4. Dr. Mahu Kalimpali and Dr. Latha Ramachand, Changes in Liquidity Following Exposure
to Foreign Shareholders: The effect of foreign listings and issues of American Depositary
Receipts by Indian firms.
5. Determinants of Returns and Volatility of Chinese ADRs at NYSE, Ali M. Kutan,
Southern Illinois University Edwards ville, Emerging Markets Group, London.
6. Internationally cross listed stock prices during overlapping trading hours: Price discovery
and exchange rate effects. By Joachim Grammig, Michael Melvin and Christian schlag.
7. Mr. Ajay Sharma, ADR and GDR price fluctuation.
8. Ranking of countries which have issued ADRs by Mr. James M Donald, Lazard Asset
Management Company.
9. Research methodology, Donald Cooper and Schindler.
Websites
1.www.investopedia.com
2.www.blonnet.com
3.www.nseindia.com
4.www.bseindia.com
5.www.nyse.com
6.www.citicorp.com
7.www.bankofny.com
8.www.projectskart.com

Influence of ADR on Underlying Stock Prices

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