Tuesday, September 30, 2008

Watching markets work: ICICI Bank

Last night, the US S&P 500 dropped 8.79%. There have been only two such days in its history: 19 October 1987 (-22.9%) and 26 October 1987 (-8.64%). The VIX rose to 46.72. There have been only three such days in its history: in 1998 and 2002.

I watched the ADR of ICICI Bank with curiosity through this. There was a lot of discussion about ICICI Bank last night so I wondered if this would influence the price of the ADR. And, I wondered whether the sharp negative shock to the S&P 500 would influence the price of the ADR. By and large, it has not. The ADR closed 12.47% down, which just reflects yesterday's price discovery in India. It's interesting to ponder what this means for both the Indian economy and for ICICI Bank.

8 comments:

  1. what does it mean for ICICI Bank and Indian market, I am interested in knowing your thoughts

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  2. Institutional Investors have long maintained that ICICI Bank has been a Play on India's Growth Story - so everyone who was bullish on India went long on ICICI Bank - but this motion has now gone for a toss.. but off late due to some decisions policy decisions taken by the bank - it has lost favor amongst most Investors...

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  3. indians wake up from mungerilal trance.
    Hard daya are here
    Expect major hari kari in the indian market.
    Expect major layoffs in IT/BPO.
    Expect end of so called reforms.
    Rupee Target 2009- Rs 60 - $1
    Sensex Target 2009- 3550
    welcome to real world, mungerilals

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  4. Sorry, I did not really understand what you are trying to tell here. Is it about lack of price discovery in India? I read your post along with an article in todays economic times about concerted efforts by mutual funds to pull down icici bank and how a single corporate house saved ICICI from this cartel. Is it really possible to do that?can you explain further for the uninitiated

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  5. ICICI bank's stock price has seen a significant decline recently.. its the worse performing big bank in the Indian markets.. its trading at less than book value adjusted for NPAs.

    The reasons for this are:
    1) Concerns about ICICI's asset quality. ICICI led the retail credit boom in India. Investors are concerned about the possible impact on earnings etc..

    2) Rumours about the bank have shaken confidence in the stock not only amongst the general public, but also institutional investors who've been burnt badly in the market crash and are relatively risk averse.

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  6. But the interesting thing now is all banks which have been major outperformers of late would do badly...there is going to be major sell off...NPA/default concerns aside...balance sheet size/ strength wud all take a backseat...valuation have got to come off...we canot trade expensive to other good globally competitive n prudent Banks..(leave aside few troubled Iconic majors).

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  7. AK...well I agree with what you're saying.. as a matter of fact, Axis Bank, which had outperformed ICICI, HDFC, Citi and JP Morgan, just crashed and made a new low today..

    Richly valued companies are just not going to be the flavour.. either the market's gotta go up or they have to drift down..take BHEL for example.. its kissed 1000 twice now..same for SBIN.

    Just curious, what do you do?

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  8. I think ICICI bank is a major pvt. sector bank ,i think it is working on the rules of RBI.

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