Indian Stocks Week-in-Review: Infosys Leads ADRs To New Highs

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Includes: GSK, HDB, IBN, IFN, IIF, INFY, RDY, REDF, SAY, SIFY, TTM, WIT
by: Himanshu Pandya

Indian stocks saw another fabulous week as the stocks were helped by another great quarter for Infosys Technologies (NASDAQ:INFY) and the strong Indian market. Sensex, the Bombay Stock Exchange [BSE] benchmark index, reached an all-time high of 12,756.23 before closing at 12,736.42. However, this time the Indian markets have been boosted by Large cap stocks. According to the Business-Standard, BSE 500, which has 500 constituent stocks against 30 stocks in the Sensex, is still 4 per cent away from its previous high, while the BSE Mid-cap and Small-cap indices are 13 and 18 per cent away from their May peaks.

Infosys (INFY) led the way this week boosted by another strong quarter. Infosys closed the week up 10.05% with a 44.2% jump in profits, while raising its revenue and earnings forecast for the fiscal year through March 2007. Price targets were raised by a number of investment banks. (Source: NewRatings)

* Analysts at Jefferies & Co reiterate their “buy” rating on Infosys. The target price has been raised from $47 to $57.
* Analysts at Prudential Financial reiterate their “overweight” rating on Infosys. The target price has been raised from $45 to $66.
* Banc of America Securities reiterate their “neutral” rating on Infosys. The target price has been raised from $38 to $50.

Infosys shows no signs of slowing down and remains the best Indian IT stock.

Infosys raised the bar and the stock price of other Indian IT stocks as investors hoped they will follow Infosys with strong earnings. Satyam (SAY) and Wipro (NYSE:WIT) closed the week up 9.36% and 8.98% respectively. You can expect these stocks to be punished if they meet or beat their targets.

HDFC Bank (up 6.98%) (NYSE:HDB) made a new 52-week high of $68.53 before closing the week at $67.93. Also, International Finance Corporation (IFC), the private sector arm of the World Bank Group, will invest $100 million in the upper tier II subordinated bonds of HDFC Bank. ICICI Bank (NYSE:IBN) is also near its 52-week high as the stock closed the week up 2.77%.

CEF’s MS India Fund (NYSE:IIF) and India Fund (NYSE:IFN) closed the week up 4.87% and 4.56% respectively. The funds were helped by the booming Indian stock market and the Sensex hitting an all time high this week. Indian Fund made out pretty well as its largest holding is Infosys Technologies. However, Indian Fund is trading at a 12% premium compared to 3.22% premium for MS India Fund. I might look to unload some IFN this week as big drop is likely for the Indian markets going by what happened last time the markets reached an all time high. That 12% premium looks a bit pricey as well.

I am still bullish for the overall Indian markets but we might see a short term downtrend from here.

Meanwhile, Sify (NASDAQ:SIFY) will report earnings on Tuesday the 17th of October and the price action seems to indicate that investors are expecting good news. The stock closed the week up almost 5%. Rediff (NASDAQ:REDF) also had a strong week as it joined The NASDAQ Global Market from The NASDAQ Capital Market. Rediff (REDF) will be launching an online game this quarter according to its Founder and CEO, Ajit Balakrishnan.

Meanwhile, not a very good September for Tata Motors (NYSE:TTM). However, they did raise their commercial vehicle prices by up to 2%.

Dr. Reddy’s (NYSE:RDY) closed the week up 2.57% as it settled Imitrex® Litigation with GlaxoSmithKline (NYSE:GSK). Under the terms, Dr. Reddy’s may exclusively distribute an authorized generic version of sumatriptan succinate tablets (in the 25 mg, 50 mg and 100 mg strengths) in the United States with an expected launch date late in the fourth quarter of calendar year 2008 ahead of the expiration of the pediatric exclusivity on 5037845 patent on February 06, 2009. GlaxoSmithKline’s Imitrex® tablets, which are indicated for the acute treatment of migraine attacks in adults, had U.S. sales of $890 million for the 12 month period ending June, 2006 according to IMS.

The two Indian telecom companies VSL and MTE closed the week down after leading the way last week.

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