The United States Fed Reserve rate cut on June 26 has sparked a rally in the Indian depository receipts, listed on the London Stock Exchange.

The Instanex Skindia DR Index, which comprises 15 global depositary receipts listed on the London bourse, has gained 8.42 per cent to 613.62 in the week following the rate cut, compared to its levels one week before.

According to Deepa Masand, analyst at Instanex Capital, the gains in the last 15 days reflect a flow of money from the bond and money markets to the equity markets.

Last week's Fed rate cut reduced the US short-term rates to a level (one per cent) which forces money market investors to look outside for better returns.

Instanex estimates that almost $30 billion has been withdrawn from the money and bond markets immediately after the rate cut, and a large part of this has found its way into the equity markets over the past week.

The strong growth in corporate India's performance coupled with limited liquidity in Indian DRs have resulted in significant gains in liquid counters such as Infosys Technologies and State Bank of India, Masand said.

This has been the maximum gain recorded in the ISDI after the 11 Fed rate cuts announced since January 3, 2001 (ignoring the rate cut on September 17, 2001, in the aftermath of the September 11 attacks).

The ISDI has gained 0.65 per cent on an average after each of the 11 rate cuts. The most significant gainers were State Bank of India (up 21.85 per cent to $17.85), Mahanagar Telephone Nigam Ltd (up 17.05 per cent to $4.40), Ranbaxy Laboratories (up 13.35 per cent to $17.38), Videsh Sanchar Nigam Ltd (up 11.89 per cent to $4.88) and HDFC Bank (up 10.94 per cent to $19.11).

The bullish fervour in the local equity markets pushed most of the DRs trading on the London Stock Exchange to new highs. Dr Reddy's Laboratories rose to a new high of $23.95 on July 1, up 74 per cent over its 52-week low of $13.76. HDFC Bank gained 75 per cent to a new high of $21.20 on July 2.

ICICI Bank, too, got into the act in the GDR market with its DR scaling a high of $7.30 on July 2. SBI shed its earlier losses with its GDR price logging a jump of 100 per cent.

SBI, which was down to a 52-week low of $10.30, recorded a smart gain of 110 per cent since then. The stock soared to its new high of $21.75 on July 2.