Following the US market trend, Indian American depositary receipts (ADRs) like Infosys, Wipro, HDFC Bank, Dr Reddy's Lab, and MakeMyTrip traded on a mixed note on Wall Street after the Federal Reserve kept rate unchanged for the fourth time on June 18.
Indian ADRs:
Major ADRs like Infosys and Wipro plunged by 1.12% and 1.32% to close at $18.46 and $2.980 apiece. These tech ADRs performed in red despite Nasdaq Composite ending in green. The performance also comes ahead of Accenture's earnings on June 20.
The Dublin-based tech giant will release its quarterly earnings on Friday, June 20, which is widely watched by investors of Indian IT companies. Accenture stock closed at $306.38, down by 2% on NYSE.
During the second quarter, Accenture predicted full-year revenue growth to 5% to 7% in local currency, while continues to expect foreign exchange impact of approximately negative 0.5%. Moreover, Accenture updated operating margin to 15.6% to 15.7%, an expansion of 10 to 20 basis points over adjusted operating margin. It expects diluted earnings per share to be in the range of $12.55 to $12.79.
Further, in the ADRs, ICICI Bank's ADR dipped by 0.6%, on the contrary, HDFC Bank's ADR rose by 0.6% after Fed kept rates unchanged. ADRs of MakeMyTrip, Roadzen, and Sify were also up by 3.2%, 0.95%, and 0.5% respectively.
Other ADRs that plunged are Dr Reddy's Lab (-0.4%), WNS Holdings (-1.4%), Zoomcar Holdings (-17.92%), and Yatra Online (-0.98%).
FOMC seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. It said, "Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate."
In support of its goals, FOMC decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
What Are ADRs?
An ADR is a security that represents shares of non-U.S. companies that are held by a U.S. depositary bank outside the United States ("U.S."). ADRs allow U.S. investors to invest in non-U.S. companies and give non-U.S.-companies-easier-access to the U.S. capital markets. Many non-U.S. issuers use ADRs as a means of raising capital or establishing a trading presence in the U.S.
Advantages Of ADRs:
According to Alice Blue's report, following are the advantages of ADRs:
- With ADRs, dividends from foreign companies are converted into U.S. dollars by the depositary bank. This feature simplifies income generation for investors, as they do not need to manage currency exchange processes or bear the risks associated with fluctuating exchange rates.
- ADRs are traded on U.S. exchanges and comply with local regulations, ensuring transparency and protection for investors. Foreign companies issuing ADRs often meet SEC reporting standards, offering U.S. investors greater confidence and trust in the securities they trade.
- The depositary bank handles currency conversion to support transactions related to ADRs, such as dividends and pricing. It ensures that the ADR price accurately reflects exchange rate fluctuations, minimizing the complexities of currency risk for U.S. investors while managing foreign transactions efficiently.
- Foreign shares underlying the ADRs are held by a custodian bank in the issuing company's home country. The U.S. depositary bank collaborates with this custodian to ensure accurate management, representation, and trading of the shares, creating a reliable link between markets.
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author, GoodReturns.In nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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